VAN hire group Northgate has turned down an approach valuing the company at nearly £775m.

The Darlington plc did not name the bidder, but said discussions about a possible takeover bid had ended after a lack of enthusiasm from principal shareholders.

The £12-a-share indicative bid was not believed to be high enough, but the mystery suitor - believed to be equity investment group Terra Firma, run by businessman Guy Hands - refused to increase the offer.

A statement released by Northgate to the Stock Exchange late yesterday said: "Following its announcement on October 10 that it had received an indicative offer of 1,200p a share, the board of Northgate announces that, after consultation with its principal shareholders, it has concluded that it would not be able to recommend an offer on the terms proposed.

"The potential offeror has stated that it is not prepared to increase its indicative offer and, as a result, the offer has now been withdrawn and discussions have terminated.

"The board is appreciative of the strong support which it has received from shareholders during this process."

Analysts had said the bid undervalued the company, which is the market leader in the UK and Spain.

Northgate opened its books to the bidder this week, but a downbeat trading statement recently is believed to have dampened hopes of an increased offer.

Some investors said that the trading statement had put potential investors off in the short-term after it warned UK competitive pressures were causing a slowdown.

However, its operations in Spain, where it is the market leader, have bolstered UK trading.

Northgate gathered the opinions of its institutional shareholders, which include JP Morgan and Standard Life, before its board took the decision to turn down the £12-a-share offer.

National newspapers reported that Mr Hands wanted to buy the vehicle leasing business at Sunderland transport group Arriva, which would have been combined with Northgate if both bids were successful.