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UPDATE 1-Australia's Treasury Wine rebuffs $2.9 bln bid from KKR

(Adds share movement, quotes, details about cost-cutting, background)

SYDNEY, May 20 (Reuters) - Australia's Treasury Wine Estates , the world's second biggest winemaker by sales, said it rejected a A$3.1 billion ($2.90 billion) takeover offer from private equity giant Kohlberg Kravis Roberts & Co LP on the grounds that it was too low.

Treasury, which has the Penfolds and Beringer labels, said on Tuesday that U.S.-based KKR offered A$4.70 per share on April 16 but that the offer price did not represent the company's fundamental value.

The shares, which were in a trading halt pending Treasury's announcement, rose 19 percent on resumption to A$4.85 at 01.29 GMT, above than the KKR offer, pointing to a possible higher bid. The shares reached an all-time closing high of A$6.43 on May 17, 2013.

The company installed a new chief executive officer to restructure the business in April after rising costs and sluggish sales prompted it to slice nearly a fifth off its full-year profit forecast. In February, Treasury posted a 38 percent slump in first-half profit.

"KKR has no immediate comment," KKR Asia Pacific public affairs director Steve Okun said. A spokeswoman for Wellington Management Co LLP, Treasury's biggest shareholder, declined to comment.

Melbourne-based Treasury has been the subject of takeover speculation on other fronts, particularly in relation to its U.S. business which has been beset by oversupply and writedowns.

Earlier this month Treasury denied that French liquor giant Pernod Ricard SA and U.S. wine behemoth Constellation Brands had made separate approaches for its U.S. business.

In a separate statement to the Australian Securities Exchange on Tuesday, Treasury said it expected to generate A$35 million in cost savings in the 2015 financial year by cutting jobs and rationalising office space, I.T. and non-essential spending.

The company would meanwhile increase spending on consumer-facing marketing by 50 percent.

"Trading conditions in Australia continue to be difficult, underpinned by intense competitor activity and a challenging retail environment," Treasury said. ($1 = 1.0696 Australian Dollars)

(Reporting by Byron Kaye; Additional reporting by Stephen Aldred; Editing by Stephen Coates)