Nick Hodges, LIG's chief executive, was understood to be furious that the talks had become public knowledge, seeing it as an attempt to drive up the value of Seton Scholl in advance of the all-share merger.
Based on last Friday's closing share prices, Seton Scholl is valued at pounds 810m and LIG at pounds 625m, which would give Seton Scholl shareholders about 56 per cent of the enlarged company.
However, a source close to LIG pointed out that Seton Scholl shares had been in steady decline in the last two months, falling from 900p to around 760p.
In contrast, LIG shares have firmed to 180p - the same level as last November before the group warned that a fall in demand for surgical and industrial gloves in the US would hit profits.
"This kind of leverage is not going to go down very well with Nick," said one observer. "If push comes to shove, LIG will continue to do its own thing. It is also quite wrong to assume that Seton Scholl is the only game in town."
Seton Scholl, chaired by Stuart Wallis, made the unsolicited merger approach to LIG in January.
Since then the group has appointed Lazards as its financial adviser in place of Deutsche Morgan Grenfell, and is understood to have been approached by at least three other parties including Pacific Dunlop of Japan, Safe Skin, a rival US condom maker, and Okamoto, LIG's joint venture partner in Japan.
According to weekend reports, Mr Wallis would chair the combined group while Iain Cater, Seton Scholl's chief executive, would become its chief executive.
Mr Hodges would be given the role of non-executive deputy chairman.
But LIG sources said it was "definitely not safe" to assume the split of boardroom responsibilities or voting rights would be as reported.
LIG has taken action to address its problems in the US, which led to a build up of excess stock, and is expected to report pre-tax profits of pounds 36m-pounds 38m when it announces its 1998 results later this month.
Seton Scholl is due to announce its results in the next fortnight.