Dutch paints conglomerate Akzo Nobel has had a 600p a share takeover offer for Imperial Chemical Industries (ICI) rejected.
A statement from Akzo Nobel said it believed that a takeover of ICI "would represent a highly attractive addition to its focused coatings and chemicals business".
The company did not rule out another bid saying that it would "continue to evaluate all strategic opportunities".
Akzo Nobel, which produces the Crown brand of paint, wants to improve its position in the paint market by purchasing ICI and gaining control of the company's Dulux brand.
The Financial Times reports that Akzo Nobel may consider making another offer as competitors may be thinking about tabling a bid as well.
Akzo Nobel is likely to have sufficient funds at its disposal after the sale of its pharmaceuticals business to US drugs group Schering-Plough for £7.4 billion in March.
News of the bid increased ICI's share price by 15 per cent in opening trades to 633p while Akzo's shares fell by one per cent in Amsterdam to €60.93 (£41.16).
ICI chief executive John McAdam is expected to discuss the Akzo approach at the company's investor day on Wednesday.
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