By Neil Maidment
LONDON (Reuters) - British pub chain Spirit Pub Co (L:SPRTC) said it had rejected a 661 million pound takeover approach from rival Greene King (L:GNK), reasoning it undervalued the company and its "attractive prospects".
Greene King, which runs breweries as well as pubs, said earlier on Tuesday that it had approached its rival regarding a potential takeover, but did not give financial details.
Spirit, whose shares closed 17.6 percent higher at 88.75 pence, said the offer was pitched at 100 pence per Spirit share in Greene King shares.
In a statement after the market close, Spirit said that it had rejected the "highly preliminary and conditional approach" on Sept. 18.
The 100 pence per share level of the offer represented a 32 percent premium to Monday's closing price of 75.50 pence, but was lower than the level quoted in a Financial Times report, which said Greene King had made a second approach at 110 pence per share.
A spokesman for Spirit declined to comment on any second approach at 110 pence per share.
Greene King, whose 1,900-strong estate includes Hungry Horse, Old English Inns and Loch Fyne Restaurants, now has until 1600 GMT on Oct. 21 to announce a firm intention to make an offer for Spirit or walk away under British takeover rules.
Spirit, which was split from Punch Taverns (L:PUB) in 2011 and runs pubs such as Chef & Brewer, Fayre & Square and Flaming Grill, said in its statement that it continues to deliver a strong performance.
"The board remains fully confident in the ongoing execution of Spirit's strategy as an independent company and that its successful delivery and strong balance sheet will create significant value for shareholders," Spirit said.
Greene King is shifting its focus to its own-managed retail business, comprising restaurants, hotels and pubs, as it competes for a bigger slice of the dining market, and to that end is reducing its tenanted and leased estate.
Spirit's estate is split into 450 leased pubs and more than 750 managed pubs, with the latter accounting for nearly 90 percent of the group's revenue.
Both groups also benefit from a larger exposure to the economically stronger London and south east regions of Britain.
In May, Greene King sold off a raft of tenanted and leased pubs for 75.6 million pounds and later pulled out of talks to buy the majority of pubs owned by rival Orchid Group, which were eventually sold to Mitchells & Butlers (L:MAB) for 266 million.
(Additional reporting by Sarah Young, editing by Louise Heavens)