Morgan Advanced rejects takeover approach from Vesuvius

* Morgan Advanced says nil-premium proposal undervalues co

* Vesuvius (Other OTC: CKSNF - news) says will not make offer for Morgan Advanced

* Morgan Advanced shares rise 5.5 pct, Vesuvius falls 1 pct (Adds analyst comment, details, updates share prices)

By Esha Vaish

Dec 1 (Reuters) - Morgan Advanced Materials Plc (Other OTC: MCRUF - news) rejected an all-share takeover proposal from Vesuvius Plc that it said would have exposed its shareholders to lower margin businesses in the iron and steel sector.

Shares (Frankfurt: DI6.F - news) of Morgan Advanced, which makes insulation products used in medical instruments and fire protection systems, rose as much as 5.5 percent to rank among the top gainers among FTSE-250 companies.

The company said its board had decided unanimously to reject the nil-premium proposal because it "fundamentally undervalued" its business and prospects.

Vesuvius, which makes ceramic moulds and linings for steelmakers and foundries, said earlier on Monday that it had decided not to make an offer for Morgan Advanced as its initial proposal had been rejected without discussion.

The proposal, made on Oct. 27, was first disclosed on Monday. Vesuvius had a market capitalisation of about 1.14 billion pounds ($1.79 billion) as of Friday's close, while Morgan Advanced was valued at 833 million pounds.

UBS (NYSEArca: FBGX - news) analysts said a merger was not a "must-do transaction" because the overlap in the companies' sales was limited - less than 10 percent of a combined 2.3 billion pounds a year.

Morgan Advanced, whose carbon- and ceramic-based high-temperature insulation products are also used in aerospace and power generation, is seeking a new chief executive after Mark Robertshaw announced his intention to step down.

Vesuvius was created by the demerger of Cookson Group Plc two years ago. Battling an industry downturn in Europe and North America last year, it shed a number of non-core businesses to focus on the steel and foundry markets.

Shares of Vesuvius were down 1.0 percent at 411.27 pence at 0957 GMT. Morgan Advanced's shares were up 4.2 percent at 304.1 pence.

Vesuvius is not permitted to make an offer for Morgan Advanced for the next six months, unless the latter's board were to permit it or a third-party bidder were to emerge. ($1 = 0.6377 pounds) (Editing by Gopakumar Warrier and Robin Paxton)