Ashquay was denied victory by a late-night Takeover Panel ruling that a 4.26 per cent stake in UK Estates bought by Ashquay from the Co-Op after Monday's bid deadline had passed could not be included among the acceptances as it had not been registered in time.
As a result Ashquay said its all-share offer for UK Estates had lapsed after it gained control of only 45.78 per cent of the target's ordinary shares. Ashquay retains a 9.9 per cent holding in UK Estates.
UK Estates said it was delighted the bid had failed, although defending it had been expensive.
Shares in UK Estates fell 5p on the news to close at 23.5p, while Ashquay ended 3p down at 37p. Ashquay said it would proceed with a one-for-six rights issue to raise pounds 1.5m to fund the costs of the bid.