The hostile bidding war mounting around Six Continents heated up with the pubs to hotels group firmly rejecting a £5.5 billion bid from entrepreneur Hugh Osmond.

Earlier yesterday Mr Osmond tabled an offer through his Aim-listed bid vehicle, Capital Management & Investment (CMI), which valued the leisure group at 648p per share.

Under his plans, Six Continents would be broken up, with the hotels business to be sold to rival hoteliers or run in partnerships.

Six Continents has always rebuffed the suggestion of Mr Osmond making an approach for its business as "fundamentally flawed".

In a statement, Six Continents said: "CMI's proposal gives shareholders nothing they do not already own except significant risk."

Tim Clarke, Six Continents' chief executive, said the approach would enrich CMI's directors at the expense of shareholders' long-term interests.

The leisure group, whose estate includes Inter-Continental Hotels, Holiday Inn hotels and All Bar One pubs, has demerger plans of its own, which would see it split itself in two.

It has accused CMI of having no hotel skills and having no partner to help run the business and has warned against trying to sell hotels at the bottom of a trading cycle.

Six Continents also claimed substantial deal costs would emerge over and above CMI's incentive package.

As an alternative to the all-share offer, Mr Osmond has said shareholders can choose to take a partial cash deal.

In both cases, shareholders would be able to keep the announced 6.6p interim dividend.

The deal would also see £1.4 billion of cash returned to shareholders - double the £700 million Six Continents has pledged to pay out if its own proposed demerger takes place.

Mr Osmond said: "Our central point is that Six Continents is at sixes and sevens. It has destroyed shareholder value for years."

CMI has promised to launch asset sales, stage sale and leasebacks of its £7.6 billion property portfolio and bring in Punch Taverns management to run the pubs estate.

The enlarged group would seek a stock market listing of its own and would likely be propelled into the blue chip FTSE 100 Index.

Mr Osmond, who made his fortune at Pizza Express and Punch Taverns, has dismissed Six Continents' own demerger plans as wasteful.