The two companies had been discussing a price of 217p a share for Hillsdown, which would have valued the group at £1.58bn ($2.6bn).

A joint statement issued by the companies said: "The boards of Unigate and Hillsdown announce that the discussions which may or may not have led to an offer for the share capital of Hillsdown have terminated."

Sir John Nott, Hillsdown's chairman

Unigate shares jumped 26.5p to 663p in early trading on Friday, following the news, however Hillsdown shares were down 19p to 187.5p.

While an enlarged company would have created a £3bn giant, Unigate investors were heartened by the announcement as the group would have had to fork out nearly £1.6bn for the new business.

Earlier this month, Unigate called off similar talks when Hillsdown's management lead by Sir John Nott, failed to recommend a proposed offer that valued its shares at around 207p each.

Unigate's interest in Hillsdown came in the wake of the conglomerate's plans to spin off its chilled foods business and its housing arm Fairview.

Hillsdown is also looking to sell its furniture business, leaving the group to focus on canning, preserves, hot drinks and biscuits.

Analysts say other predators are casting their eye over the company.

On Thursday Hillsdown's shares had ended eight pence higher at 198.5p following news that the two companies were in negotiation.

Unigate's shares meanwhile ended Thursday's session 18p lower at 633.