(Recasts with Spirit statement, updates shares)
By Neil Maidment
LONDON, Sept 23 (Reuters) - British pub chain Spirit Pub Co said it had rejected a 661 million pound ($1.08billion) takeover approach from rival Greene King,reasoning it undervalued the company and its "attractiveprospects".
Greene King, which runs breweries as well as pubs, saidearlier on Tuesday that it had approached its rival regarding apotential takeover, but did not give financial details.
Spirit, whose shares closed 17.6 percent higher at 88.75pence, said the offer was pitched at 100 pence per Spirit sharein Greene King shares.
In a statement after the market close, Spirit said that ithad rejected the "highly preliminary and conditional approach"on Sept. 18.
The 100 pence per share level of the offer represented a 32percent premium to Monday's closing price of 75.50 pence, butwas lower than the level quoted in a Financial Times report,which said Greene King had made a second approach at 110 penceper share.
A spokesman for Spirit declined to comment on any secondapproach at 110 pence per share.
Greene King, whose 1,900-strong estate includes HungryHorse, Old English Inns and Loch Fyne Restaurants, now has until1600 GMT on Oct. 21 to announce a firm intention to make anoffer for Spirit or walk away under British takeover rules.
Spirit, which was split from Punch Taverns in 2011and runs pubs such as Chef & Brewer, Fayre & Square and FlamingGrill, said in its statement that it continues to deliver astrong performance.
"The board remains fully confident in the ongoing executionof Spirit's strategy as an independent company and that itssuccessful delivery and strong balance sheet will createsignificant value for shareholders," Spirit said.
Greene King is shifting its focus to its own-managed retailbusiness, comprising restaurants, hotels and pubs, as itcompetes for a bigger slice of the dining market, and to thatend is reducing its tenanted and leased estate.
Spirit's estate is split into 450 leased pubs and more than750 managed pubs, with the latter accounting for nearly 90percent of the group's revenue.
Both groups also benefit from a larger exposure to theeconomically stronger London and south east regions of Britain.
In May, Greene King sold off a raft of tenanted and leasedpubs for 75.6 million pounds and later pulled out of talks tobuy the majority of pubs owned by rival Orchid Group, which wereeventually sold to Mitchells & Butlers for 266 million.($1 = 0.6111 British Pounds) (Additional reporting by Sarah Young, editing by LouiseHeavens)
