By Mark Potter

LONDON (Reuters) - Marks and Spencer shares bounced from a 7-1/2 year low on Tuesday on speculation the retailer might become a bid target, although billionaire Philip Green denied market talk he was buying a stake.

"I haven't bought any shares, and I don't own any shares in any retailer," Green, the owner of department store chain Bhs and fashion group Arcadia, told Reuters.

Green abandoned plans for a 9.1 billion pound, or 400 pence a share, bid for Marks and Spencer (M&S) in 2004 after failing to win over the board and enough of the group's shareholders.

Shares in M&S, Britain's biggest clothing retailer, hit a low of 210-1/4 pence on Tuesday, following a profit warning last week, before bouncing to 231-1/2 pence on bid speculation.

"I think M&S is a very interesting acquisition target," said Bernstein analyst Luca Solca.

"There's fundamental value in M&S. The brand is very strong and the stores are certainly better than they were before (Chairman Stuart Rose took the helm in 2004)," he said.

Solca said M&S's extensive property assets could appeal to private equity firms and also thought a tie-up with supermarket chain J Sainsbury , considered by Rose in the past, would make sense.

"The two companies have very similar consumer audiences ... They would be able to provide the market with a very interesting grocery and non-food offer," Solca said.

At 1:00 p.m. British time M&S shares, which have tumbled from a record high of 759 pence in April 2007, were up 4 percent at 225.75 pence, the biggest rise on the benchmark FTSE index .FTSE and valuing the firm at about 3.7 billion pounds.

Shareholders are due to vote on Rose's appointment as executive chairman at the group's annual general meeting (AGM) on Wednesday, and newspaper reports have said up to 30 percent of M&S shareholders plan to abstain or vote against. Combining the roles of chairman and chief executive is against UK corporate governance guidelines.

M&S declined to comment on either the bid speculation or the level of support it expects at the AGM.

(Additional reporting by Michael Taylor; Editing by Quentin Bryar)