The bid will top the original 2.36 billion pound all-share offer launched by Whitbread Plc last week.

The spokesman said Punch Taverns is waiting for Allied to publish details on the Whitbread deal early next week before launching an official bid.

The spokesman also said that Punch Taverns is expecting Whitbread to up its bid before the end of the week. Whitbread's proposed deal includes the sale of Allied's 3,500 pubs and half of the First Quench chain.

Whitbread and Allied have been treating the proposed transaction as a done deal, with Whitbread announcing plans to buy back 10 per cent of its equity and demerge its brewing division after the purchase.

Allied said it is planning to focus on its wine and spirits operations. The company said last week that Tony Hales, its chief executive, will resign at theend of July, when the proposed sale is completed. Philip Bowman, the current finance director, has been tapped to replace Hales.

The Wall Street Journal