Scottish & Newcastle has started talks with Carlsberg and Heineken over a possible recommended offer of 800p-a-share, valuing the brewer at £7.8bn.

Carlsberg and Heineken have been circling S&N since October last year and their three offers have been rejected as “unsolicited and derisory”. However, earlier this week S&N admitted it would be prepared to enter discussions if the offer was at least 800p-a-share.

The three companies have asked the Takeover Panel for its 'put up or shut up' deadline of 21 January to be extended until 24 January so that Carlsberg and Heineken can complete due diligence.

Shares rose 39p to finish on 765p on the news, although analysts remained cautious that the offer could still fall apart.

“There is still the thorny issue of BBH disclosure… we are not quite home and dry yet,” Andrew Holland, an analyst at Dresdner Kleinwort told the Financial Times.