The group cautioned that it had no firm offer on the table and there was "no certainty" of a deal.
One industry source said that the talks were in the very early stages. "A deal is not imminent and talks could come to nothing," he said.
However City analysts believe the announcement puts Allied Colloids in play. The group could prove attractive to a host of large US and European chemical companies.
Ciba and Dow Chemical have been touted as possible bidders. Laporte, which had been considered a front runner to make a bid, yesterday ruled itself out of the running. As did Elf Atochem and BASF, which were seen as other potential buyers.
Allied Colloids' share price rose 14.5p yesterday to 139.5p. It leapt 10.5p to 125p on Tuesday and has risen from 101.5p earlier this month.
Analysts reckon a buyer would have to pay up to 180p a share, valuing the group at pounds 1.2bn, in order to secure the support of Allied Colloids large shareholders. Experts agree it would have to be an agreed bid to succeed.
Allied Colloids produces chemicals used in anything from the textiles to the paper industry. Despite the recent rise its shares have underperformed the market by 20 per cent in the last 12 months.
The disappointing performance can be put down to concerns over the impact of the strong pound, rising raw material prices, and a slump in the chemicals sector.
A bid for Allied Colloids could prompt a wave of consolidation in the sector.