REGIONAL brewer Wolverhampton and Dudley (W&DB) has rejected an improved offer from Pubmaster as "penny-pinching" and urged shareholders not to back the pubs group.

W&DB said the 513p per share, or £485m, bid ignored the company's strong trading performance, and the increase in its market value over the past year.

The rejection came just hours after Pubmaster, of Hartlepool, upped its offer from 480p per share, in a last-ditch attempt to sway shareholders.

Yesterday was the last day Pubmaster could raise the stakes, and it has two weeks to try and seal the acquisition.

W&DB chairman David Thompson criticised the improved offer and said he believed his board's strategy would deliver better value to investors.

The brewer is returning £200m to shareholders by April 2003, selling 170 pubs and streamlining its brewery and distribution arm.

Speculation over a potential bid for W&DB began last August, when leisure entrepreneur Robert Breare was rumoured to be lining up an offer.

Pubmaster first revealed its interest in February, before launching a bid last month.

Yesterday, Mr Thompson said: "This penny-pinching offer comprehensively ignores the rerating of the sector and the significantly-improved performance of Wolves since the current offer period began, almost a year ago.

"Our planned cash return of 212p per share, plus the retention of shares in an asset-rich, soundly-financed, focused and growing company is worth considerably more than Pubmaster's offer.

"The increased offer fundamentally undervalues Wolves, and the board therefore continues to advise shareholders to reject it."

Pubmaster said it had received acceptances from 16.8 per cent of shareholders, after a weekend of talks.

Pubmaster chief executive John Sands said shareholders should accept the "excellent price and certainty" the group offered. He condemned W&DB's "scorched earth" defence strategy, saying it was dependent on borrowing cash and would leave the business over-geared.

Analysts were split on what shareholders would do. Greg Feehely, at Old Mutual, said shareholders were being offered the certainty of cash in an uncertain market, and that Pubmaster was likely to be successful.

But Nigel Popham, at Teather and Greenwood, said that while the bid was at an improved price, it was unlikely to be enough.

Pubmaster has to gain acceptances from 50 per cent of shareholders by August 13.

W&DB urged shareholders not to sign any documents from Pubmaster, or sell any shares on the open market.