SABMiller, the world's second largest brewer, has promptly rejected an improved offer from bigger rival Anheuser-Busch InBev, saying that its £68 billion valuation was insufficient.
Earlier Belgium-based AB InBev said it was willing to pay £42.15 in cash per SABMiller share, having already made two prior offers at £38 and £40, the increase made possible if its two biggest shareholders accept a lower value share-and-cash alternative offer.
But SAB Miller said its board, excluding the directors nominated by its biggest shareholder Altria, has unanimously rejected the proposal.
"It still very substantially undervalues SABMiller, its unique and unmatched footprint, and its standalone prospects," the UK-based company said in a statement.
SABMiller Chairman Jan du Plessis had earlier described his company as "the crown jewel of the global brewing industry" and described AB InBev's proposals as designed to be unattractive to many shareholders.
AB InBev is offering an alternative to the cash offer of partial payment in shares, limited to about 41% of SABMiller stock and expected to be taken up by the brewer's top two shareholders, Altria and the Santo Domingo family of Colombia, who together own 40.5%.
Under this offer shareholders would get £2.37 a share plus 0.48 special unlisted AB InBev shares which are convertible into ordinary stock after a five-year lock-up period.
With AB InBev intending to buy nearly 41% of SABMiller via the partial unlisted shares and cash offer alternative, SABMiller noted this put an implied price tag on SABMiller's equity of just £65 billion.
AB InBev said it expected most SABMiller shareholders would accept the all-cash offer but emphasised the proposal was conditional on getting the support of both Altria and Bev Co, the Santo Domingo family's company which holds a 13.9% stake.
Altria, the tobacco group which has 26.6% of SABMiller, said in response it supported the bid and would be prepared to opt for the share alternative.
But AB InBev later issued a statement saying it "wishes to clarify that it does not currently have the support of Bev Co Ltd for the proposed combination."
Meanwhile SABMiller said its board members, excluding those from Altria, had been unanimous in rejecting the approach. Two directors are Santo Domingo nominees.
Analysts at RBC Capital Markets also said the proposed offer appeared some way below a "knock-out" bid.
Bernstein Securities said the most likely outcome was for SABMiller to eventually accept AB InBev's advances, leading to a higher bid after extension of an 14 October deadline for AB InBev to reveal its intentions.
SABMiller shares were up 0.9% at £36.54 pounds by 1.24pm Irish time, when AB InBev's were 1.4% higher at €99.42.
If the bid is successful the merged group would be a brewing colossus making nearly a third of all beer consumed worldwide, with analysts seeing it as the end-game for the industry's consolidation as the big four - AB InBev, SABMiller, Heineken and Carlsberg already brew over half of the world's beer.
It would add Africa and certain Latin American and Asian breweries to AB InBev's extensive presence across the Americas and add SABMiller's Peroni, Grolsch, Pilsner Urquell and other international brands to AB InBev's existing line-up which includes Budweiser, Stella Artois and Corona.
Africa is expected to see a sharp jump in the legal drinking age population in the years ahead as well as increased beer consumption among a fast-growing middle class.
Africans drink nine litres of beer per head, compared with a global average of 45, SABMiller said earlier this year. However, alcohol consumption is in line with the global average and the key to increasing sales is to wean consumers off homemade or illicit drinks.
In western Europe and North America beer volumes have steadily declined in the past two decades and US consumers in particular have shifted to craft brews made by independent players.
"We believe Africa in particular will be a key driver for the joint company in the future," Brito said.
AB InBev also said it intended to establish a secondary share listing and regional headquarters in Johannesburg, where SABMiller has a secondary listing, which local investors have said they want retained.
Public Investment Corp, a South African state-owned firm with a 3.4% stake in SABMiller, said the listing addressed one of its concerns and that it would wait for guidance from SABMiller's board.
The company, partly controlled by 3G Capital, a private equity fund run by a group of Brazilian investors, has a strong track record for takeovers and keen cost-cutting thereafter but Brito declined to say what potential synergies a SABMiller deal might realise.
He did say, however, that he remained confident the company could put together financing for a bid. According to banking sources, it has asked banks to underwrite $70 billion in debt.