In a terse six-line statement, Vaux, owner of the Swallow Hotels chains, two breweries and about 700 pubs, put an end to two weeks of intense bid speculation, which had led to a sharp rise in its share price.
Vaux "is not in any discussions which may lead to an offer for the company, or which relate to any of the group's assets," the statement said.
The announcement triggered a wave of selling that left the shares 41p lower at 318.5p - the worst performer in the FTSE 250 index.
The shares are now 45p below their intra-day high touched on Wednesday at the height of the takeover speculation.
The rumour mill had indicated that Whitbread as a possible suitor, suggesting that the brewing giant could be interested in bolstering its Marriott Hotel and Travel Inns hotel chain through the acquisition of Swallow.
According to the rumours, Whitbread would be likely to offload Vaux's pubs estate with Enterprise Inns, which was mentioned as a bidder.
The two companies have been periodically linked with Vaux since June when the Sunderland-based group announced the breakdown of talks discussions with a bidder - widely believed to be the hotel group Stakis.
City analysts yesterday said that the takeover speculation was likely to resurface in the near future as most investors believe the 34 Swallow Hotels would be better off as part of another hotel business.
"In Vaux you have a four-star nation-wide hotel chain whose rating has been pulled down by a poor-to-average pub estate," one observer said.
However, other experts said that the new chief executive, Martin Grant, who was recently recruited from Allied Domecq, could choose to spin off the Swallow business and float it on the market as a stand alone business.
Mr Grant yesterday was unavailable for comment.