Institutional investors said the stand-off now meant the group was even more vulnerable to a takeover. "It's all a bit of a mess," one said.
Swallow, formerly known as Vaux Group, has been negotiating for months to sell its breweries in Sunderland and Sheffield to a management team led by the brother of the former chairman, Sir Paul Nicholson.
The alternative to the proposed pounds 70m sale was almost certain closure, which would have led to the loss of 700 jobs and damage to the local reputation of the Nicholson family, which has run the business for generations.
Following the rejection of its original offer last week, the breweries' management, backed by the Alchemy venture capital group, tabled two revised offers yesterday.
The first would have seen it double the offer price if Swallow agreed to sell all the 660 tenanted pubs instead of the 350 previously proposed. The other offer involved a reduced offer price if combined with a shortened beer supply agreement.
Swallow's chief executive Peter Catesby immediately rejected the new proposals as "inadequate". He described the revised beer supply option as "worse than the original offer," while the plan to involve all the pubs "was some pounds 20m less than the value of the assets," he said.
Mr Catesby said the management buyout's plan was already pounds 15m less than the value of the individual parts of the business. He concluded: "We do not propose to pursue further discussions with Alchemy and the MBO on this basis. We remain prepared to review any new proposals put to us."
Although there has been interest from Mansfield Brewery in the Sheffield site there have been no other offers for the Sunderland brewery. Swallow shares closed unchanged at 295p.