In a terse one line statement, the company said "Against the background of its overriding wish to maximise shareholder value, the board of The Tetley Group has decided to pursue another opportunity rather than proceed with flotation at this time."

The announcement prompted speculation that the company might have had an approach from another group. Possible partners include Nestle, the international food conglomerate, and Tata, the Indian tea group.

Uncertainty over the situation in the stock market, which has been unsettled by events in Asia, may also have been a factor.

Tetley had previously announced that it was bringing forward plans for a market quotation this month. The company was expected have a market value of around £400m ($637m).

Tetley was valued at £190m when it was sold by drinks giant Allied Domecq as a management buy-out in 1995.

The chairman and chief executive, Leon Allen, and finance director, Roger Price, who own 8% of the company between them, stood to make millions from the flotation.

Tea drinking is on the decline

Under their management, Tetley had increased its profits since the buyout from £10.7m in l995-96 to £41.2m in l997-98, with little change in sales.

It markets tea under the Tetley, Quickbrew and Lyons brands in Britain, with a 26% market share, just behind main rival PG Tips, owned by Unilever.

And the company has a quarter of its sales in the USA, where it has built up a significant speciality coffee business.

Earlier the company chairman said that the sector was "ripe for consolidation". One analyst commented that the company had shown little enthusiasm for the flotation.