ELECTRICAL systems manufacturer Eaton Industries has conceded defeat over its attempted £242 million takeover of a Tyneside air filtration company.

The firm, which manufactures equipment for use in lorries, trains and on aircraft, sparked a bidding war for Gateshead-based Domnick Hunter, after learning of a £215 million bid from American manufacturing conglomerate Parker Hannifin in early August.

Eaton responded by offering £242 million.

Domnick Hunter manufactures filtration and purification products for a range of industries, including drugs firms which need clean air, and drinks companies.

The bid was conducted by Eaton Industries Limited from its headquarters on Worsley Road North, Walkden, on behalf of its US parent company Eaton Corporation.

Like Parker Hannifin, Eaton was seeking to extend and strengthen its manufacturing processes in the UK .

At the time of the initial bid, Alexander Cutler, the chairman and chief executive of Eaton, said: "The Domnick Hunter group will provide us with an excellent opportunity to build on our recent initiatives in the filtration sector. Domnick Hunter is a strong business and will add valuable scale and market leadership to our competitive position."

Parker Hannifin revised its offer, which had initially been agreed by Domnick Hunter management, to £232 million, and made a further offer of £244 following the Eaton bid. Eaton finally bowed out of the race yesterday, saying that it would not put forward another offer.

A statement from the company said: "The board of Domnick Hunter recommended a higher cash offer made by Parker Hannifin International Corporation.

"Following careful consideration, the board of Eaton Industries has concluded that the price offered by Parker Hannifin is in excess of the price which Eaton Industries is prepared to offer.

"Therefore, in agreement with the Panel on Takeovers and Mergers, Eaton Industries will not be proceeding with the Increased Offer for Domnick Hunter and will allow the Original Offer to lapse on 7 October 2005, the next closing date."