Shares in the fashion retailer Arcadia have closed more than 13% higher after news of a new takeover approach.

Philip Green, who owns the rival BHS, offered �690m ($1.1bn) for Arcadia's seven British High Street chains.

Philip Green has never knowingly overpaid for a business

Stuart Rose Arcadia

But the Top Shop owner said the offer was too low, and its board rejected the approach.

Arcadia's chief executive Stuart Rose told BBC Radio 4's Today programme: "We don't think it offers value for the business".

Mr Green said he was now considering his options.

'Not a good deal'

His original bid amounted to 365 pence a share. On Friday, Arcadia's shares closed at 300p.

This share price has been at 400 pence once...it's got a very poor track record

Philip Green

But Mr Rose said the fact that the offer represented a 21% premium to Friday's closing price did not make it a good deal.

He said Arcadia' shares had reached a high of �4 this year and had been affected by the volatility in the stock market.

As well as that, the business was still going through a period of recovery.

"I still believe the company is undervalued," said Mr Rose.

"Philip Green has never knowingly overpaid for a business," he added.

Breaking up the business

But Mr Green hit back at the suggestion that his bid fell short of the mark.

Arcadia brands

Dorothy Perkins Burton Evans Wallis Top Shop Top Man Miss Selfridge

"This share price has been at 400 pence once...it's got a very poor track record," he said.

His bid was backed by the Icelandic retailer Baugur which is a 20% shareholder in Arcadia.

Mr Green said Baugur would like to buy the British firm's young fashion brands - Top Man, Top Shop and Miss Selfridge - from him if his bid was accepted.

Empire building

Philip Green's success at reviving BHS has earned him the respect of the fashion retail industry and he is keen to expand his empire.

He was involved in merger talks with Woolworths in June this year, and takeover talks with Marks and Spencer in March last year, but both ended without a deal.

He is thought to be considering making an offer for Littlewoods' stores.

His 165 BHS shops now have sales of about �1bn.

Buying Arcadia would give him about 900 high-street stores, and the chance to take control of the UK's middle-market fashion sector.

Arcadia's shares closed up nearly 40 pence at 340.25p.