The company, which makes yarn, fabrics and carpets through various subsidiaries, made the announcement as it said pre-tax profits for the year to the end of September rose to pounds 16.3m from pounds 15.9m in the previous 12 months.
The possible bid follows a profit warning in November, when the company's announcement that it had discovered financial irregularities sent its share price tumbling 18 per cent, and comes as the strong pound continues to hamper exports.
Peter Morrison, an analyst at Granville Davies, said the company could sell for between 175p and 180p a share, valuing it at around pounds 125m. The shares closed today at 165.5p, a gain of 41.5p.
"If the management were to get it for much less than that I would have thought shareholders were capitulating quite weakly," he said. The company enjoyed a good market position in the UK and "quite a nice position" in North America.
The company said it had set up a committee of independent directors to consider the offer, and had appointed Credit Suisse First Boston as its adviser.
Allied said its sales rose to pounds 231.7m from pounds 227m as earnings per share rose to 16.6p from 16.3p. "The company continues to trade well and we look forward to additional production capacity coming on stream during the current financial year. We are anticipating that the current year's outcome will be satisfactory."
Allied said last autumn that "serious accounting irregularities" worth about pounds 2.8m would cut 1997 profit, prompting its shares to fall 18 per cent. But for those difficulties it would have exceeded market forecasts of pounds 19m in pre-tax profit.Reuse content