The Bank of Scotland has increased its offer for NatWest in an attempt to outbid rival Royal Bank of Scotland.

But the offer was almost immediately rejected by NatWest.

Its chairman and chief executive, Sir David Rowland said: "This is nothing more than tactical manoeuvring by a bank that is struggling to achieve credibility for an inadequate offer and risky proposals."

The new bid values the bank at 1456p per share or £24.3bn.

Bank of Scotland also plans to replace its proposed special dividend of 120p a share with special stock units.

The units will be worth at least 126p a share.

The Bank of Scotland said its new offer was 11% higher than that of Royal Bank of Scotland.

Sir John Shaw, Governor of the Bank of Scotland said: "At the latest prices, our new offer is well ahead of the Royal Bank of Scotland's, providing NatWest shareholders with a straightforward decision."

Clearer terms

The bank said the new offer would remove the uncertainty which had surrounded the value and timing of the special dividend payout which it had originally offered.

Bank of Scotland had originally offered to pay NatWest shareholders a special dividend of 120p a share, which it said it would raise from selling off parts of the NatWest business.

The special dividend had caused confusion among some investors who were unsure whether its full value should be considered part of the bid price.

And because it was dependent of sales of business by Bank of Scotland the timing had also been uncertain.

Bank of Scotland said the special stock units would not depend on any sale of part of NatWest.

News of the improved offer saw shares in NatWest jump 49p to 1283p by close of trade. Bank of Scotland shares were 17.5p higher at 678p, while Shares in Royal Bank of Scotland were up 20p at 1055p.

Mergers can work

The Royal Bank made its offer on 29 November, and its bid is valued at about £22bn.

Royal Bank of Scotland has until 31 January to launch a counterbid and the two banks have until 14 February to convince NatWest shareholders of their case.

The Bank of Scotland launched a fresh attack on its takeover target earlier this month, citing the Lloyds TSB merger and HSBC's acquisition of Midland as examples of mergers which have created shareholder value, dismissing NatWest claims that few mergers work.

The bank has previously said that its hostile bid for NatWest will yield savings of more than £1bn a year within three years.