Marston, which launched an unprecedented pounds 317m counterbid for W&D earlier this month, rejected the improved bid - a 77 per cent premium to Marston's share price at the start of the takeover war - saying it was still too low.
The bitter two-way battle took a further twist when it emerged that Marston, famous for its Pedigree bitter and Pitcher and Piano pubs, was unlikely to increase its bid. Sources close to the company said the brewer was not planning to pay more for its rival but would launch a lobbying campaign to convince shareholders of the merits of its strategy.
Marston has proposed closing two W&D breweries, in Wolverhampton and Hartlepool, and selling 1,150 pubs for pounds 250m in a effort to improve the enlarged group's performance.
David Thompson, the W&D managing director, urged Marston's investors, many of whom also hold a stake in W&D, to accept the offer, which is 9 per cent higher than the original pounds 262m bid rejected by Marston in November. He said the bid would significantly enhance earnings in the combined group and help it to weather the downturn in the regional brewing market.
Shareholders in the two companies said that although W&D's improved offer was lower than expected, it could be enough to win control of Marston.
"It's not a knockout blow but I think they'll get it, unless Marston does something clever," one leading investor said.
Shares in the two brewers, which have soared since the start of the saga, fell as the market took profits and expressed scepticism over the prospect of further price rises. W&D fell 8p to 427.5p, while Marston closed 5p lower at 288.5p.
"The market has reservations over either bid and has decided that it is best to lock some profits in now," one analyst said.
Mr Thompson claimed that a W&D-Marston tie-up would achieve cost reductions of pounds 17m - pounds 5m higher than previously indicated, but still below Marston's estimate of a pounds 24m saving.