IP Group has raised its offer for rival science commercialisation outfit Touchstone Innovations to around £490m and secured the backing of the target company’s founder Imperial College in an effective knock-out blow in the hostile takeover battle.

The news takes support for the deal to 89.7pc, allowing IP Group to de-list Touchstone from the Aim market and squeeze out any remaining opposed minority shareholders.

FTSE 250-listed IP Group originally tabled a firm all-share offer worth £466m for Touchstone on June 19, but the value of the deal crashed below £400m over the intervening weeks as the share prices of both firms fell.

Touchstone’s board rebuffed the original offer and its chairman David Newlands wrote to shareholders to say it was “unwelcome”, arguing it undervalued the company, was a bad fit for the two firms, and risked driving out quality staff.

The revised all-share offer values each Touchstone share at 304p, representing an 11.1pc premium on yesterday’s close of 274p.

IP said each Touchstone shareholder would receive 2.2178 new IP shares for each Touchstone share, compared with the original 2.1575 offer, giving Touchstone shareholders a stake in the combined company of around 34pc.

In a statement responding to the improved offer this afternoon Touchstone said it "welcomes any increase" but described it as "modest" and below its own valuation of its net assets per share of 312p. It advised shareholders to take no action and said a full response would be circulated within a fortnight.

The deal was always likely to go through despite Touchstone’s opposition as IP had the support of the firm’s three largest shareholders - star investor Neil Woodford, hedge fund Lansdowne and institution Invesco - which together own 74.5pc of Touchstone’s stock, as well as half of IP’s.

Nonetheless industry sources believed Imperial College - which owns 15.3pc of Touchstone and originally spun it out in 1986 to commercialise its scientists’ work - could have destabilised the deal had it come out strongly against it.

Instead Imperial College today welcomed the improved offer. The endowment board of the university said: “We are supportive of the strategic rationale of this transaction and appreciate the increased value for Touchstone's shareholders.”

Both IP and Touchstone invest in technology and research in partnership with universities to bring emerging ideas and technology to market. IP says the tie-up will create an international leader in commercialising innovation.

Last week in a trading update Touchstone revealed the value of its investments had risen by 10pc since the start of the financial year to £502m, strengthening its argument that it had been undervalued.

Touchstone’s share price jumped 7.5pc to around 294p in lunchtime trading, while IP’s share price was up 1pc to just over 138p.