Takeover interest from billionaire retailer Philip Green sparked shares in Top Shop-to-Miss Selfridge group Arcadia into life.

Despite Arcadia rejecting the £690 million approach without the need for talks, the announcement sent shares 16 per cent higher in morning trading.

Analysts said the possibility of another bid had boosted the rating of the company at a time when trading prospects also appeared strong.

Arcadia said the 365p-a-share offer made by a company controlled by BHS owner Mr Green's family undervalued the operation.

The vehicle used by Mr Green for the possible offer, Taveta Investments, is now considering its options.

It is thought the proposed bid was made in conjunction with Baugur, the Icelandic retailer which failed to land Arcadia earlier this year.

Arcadia, which also has the Burton, Dorothy Perkins and Top Man brands, received the approach last week when its shares closed at 276.5p.

The company said the decision by the board to reject Mr Green had been unanimous.

It is thought directors believed its share price was undervalued after seeing fortunes revive recently.

The group has focused on key brands and improved its supply chain after offloading underperforming chains such as Warehouse, Principles, Racing Green and Hawkshead last year.

Analysts agreed Arcadia was right to reject the approach. Rowan Morgan, of KBC Peel Hunt, said: "In May, Arcadia was trading at 417p so it can hardly be deemed as generous."

He said investors would be unwise to sell out to Mr Green if he pressed ahead with his 365p-a-share approach.

He said: "Arcadia is worth more than this and existing management is doing a good job."