UPDATE 2-Australia's Transurban spurns Canada funds' offer

* Transurban leaves door open to takeover talks

* Shares surge 20 percent to nine-month high

* Latest Canadian swoop on battered infrastructure groups (Adds analyst comment)

By Sonali Paul

MELBOURNE, Nov 5 (Reuters) - Australian toll road operator Transurban Group (TCL.AX) rejected a takeover approach from two Canadian pension funds on Thursday, but left the door open to a better offer, sending its shares up 20 percent.

The move marks the latest swoop on an Australian infrastructure group by Canada's pension funds, taking advantage of beaten-down share prices as their targets struggle to refinance debt in the credit crunch.

Transurban, worth A$6 billion ($5.5 billion) ahead of the announcement, said the offer came from the Canada Pension Plan Investment Board and the Ontario Teachers' Pension Plan Board, which together already own about 28 percent of the group.

The Australian group, which owns roads in Sydney, Melbourne and Virginia in the United States, declined to give any details on the approach.

Transurban made the announcement after media speculation that the Ontario Teachers' fund planned a buyout of the Australian firm. The talk began last week after the fund sold down its stake in rival toll-road owner Macquarie Infrastructure Group (MIG.AX).

Transurban shares soared as high as A$5.25 and last traded up 17 percent at A$5.13. The stock had been down 19 percent so far this year, badly lagging the broader market's 22 percent surge.

Analysts' valuations on Transurban are just above A$5 and an offer much higher than A$5.25 would be surprising, said Will Seddon, investment analyst at White Funds Management, which owns shares in Transurban.

"But they (the Canadian funds) might have a different view on valuations," Seddon said.

Canada Pension Plan Investment Board bought Macquarie Communications Infrastructure Fund in June for $1.3 billion, but only after top shareholders successfully pressed for a sweetened offer at double its closing price before the first offer.

Taking Transurban private would make sense for the pension funds, as its value would no longer be subject to sharp market swings, as they have this year, Seddon said. [ID:nSYD473541]

"They're a good suite of assets, relatively low risk. It wouldn't be a silly move," he said.

Transurban's biggest single shareholder, Australian fund CP2, with a 15 percent stake, could not be immediately reached for comment. ($1=1.095 Australian Dollar) (Editing by Mark Bendeich and Valerie Lee)