Hugh Osmond's £5.6bn hostile takeover bid for Six Continents (6C) was scuppered yesterday.
Shareholders backed plans to separate the pubs and hotels into two companies.
The decision came as a blow to Mr Osmond who has been fiercely critical of the 6C management. He wanted shareholders to postpone the split and consider his offer for the business.
Despite Mr Osmond saying he could make up to £5bn for investors, they voted three to one against an adjournment.
Relieved executives Tim Clarke and Richard North will now press ahead with the split.
The 2,000-strong pubs business, which includes Ember Inns and Harvester, will be called Mitchells & Butlers. The 3,500 hotels that includes Holiday Inn, will be renamed InterContinental Hotels.
Mr Clarke will manage the pubs group while Mr North will head up the hotels business. But their time in charge could be short lived.
As news of Mr Osmond's defeat emerged many people within the pub industry where predicting the two businesses would still be sold.
John Sands, executive chairman of Pubmaster said: "I think there will be a lot more bidders after the split. The management have taken near fatal blows for mistakes in the past. I think we will see a sale by April."
Mr Osmond, who founded Punch Taverns and has a stake in Spirit Group, did not rule himself out for the future: "It is still there on our list of targets. Many companies look cheap and we are considering quite a lot of things."
Related articles:
Six Continents appoints takeover committee (12 March 2003)
Tim Martin enters the 6C debate (11 March 2003)
CVC and Texas Pacific line up rival £6bn 6C bid (10 March 2003)
Hugh Osmond unveils hostile 6C bid (3 March 2003)