Chloride Group, the British power supply protection company, has rejected a £657 million bid approach from Emerson Electric, an American rival.

Its shares rose 26 per cent yesterday after it said that it had turned down the offer.

Chloride, which makes equipment that maintains supply during power cuts, said that the preliminary approach had materially undervalued the company and its prospects.“Accordingly, the board has rejected it,” it said.

It is understood that Chloride will not consider a bid that values the business at less than 300p per share. The Emerson all-cash bid was at 255p.

Recent deals in the sector, such as the $6.1 billion purchase of American Power Conversion by Schneider Electric, of France, which was completed last year, suggest that Chloride could attract a higher price.

Chloride is Europe's largest maker of back-up power supplies. It helps companies, including Goldman Sachs, J Sainsbury and BT, to protect their computer systems and other electrical equipment in the event of a power cut. It also supplies devices that maintain power to industrial equipment for the London Underground, Heathrow's Terminal 5 and oil rigs.

Chloride has predicted that earnings per share will rise by 20 per cent this year as demand in the sector increases by 8 per cent annually.

Michael Blogg, an Arbuthnot analyst, said: “Chloride has built a strong reputation in this niche,looks set to remain robust for several years as a result of energy utilities' inability to deliver the reliable ‘clean' power needed to run complex computer-controlled processes.”

Emerson Electric confirmed that it had made the approach but said it was not certain that it would bid again.

Keith Hodgkinson, Chloride's long-serving chief executive, will retire in July. His successor will be Tim Cubold, the chief operating officer.

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