Speculation about a bid for M&B began in March

M&B, which owns the Harvester and All Bar One chains, said the offer undervalued the business.

The group operates about 2,000 outlets across the UK.

M&B emerged as a potential bid target for Mr Tchenguiz in March, and the Takeover Panel had given him until 8 May to make a formal bid or walk away.

Bid defence

M&B's board met to consider the 550-pence-per-share offer from Mr Tchenguiz's R2O consortium on Wednesday night.

M&B CHAINS All Bar One Toby Carvery O'Neill's Vintage Inns Ember Inns Sizzling Pub Co Edward's Scream Harvester Browns See M&B's share price

The R2O offer proposed combining M&B's pub estate with that of the Laurel Pub Company, which is owned by Mr Tchenguiz and includes the Yates's chain of wine bars.

However, setting out its reasons for rejecting the approach, M&B said its like-for-like sales - a measure which strips out the impact of new outlets - had grown at the fastest rate in the sector over the past two years.

It added that sales had risen by 4.1% in the first 29 weeks of the current financial year.

"The board believes that the company has excellent prospects for organic growth and is well placed to take advantage of further consolidation opportunities," the company said.

Last week, M&B sought to strengthen its defence against any takeover bid by saying it would seek to return at least �500m to shareholders this year if it could not find any suitable takeover targets itself.