Axel Springer, a German newspaper publisher whose interests include the popular newspaper Bild Zeitung and the heavyweight daily Die Welt, was last night forced to issue a statement after persistent speculation in the City linking it with Mirror Group.
The group issued the statement last night to clarify an earlier comment made by a spokesperson in response the speculation. Earlier in the day, a spokesperson said there was "absolutely nothing" in the rumours and denied that the German group had any interest in Mirror Group.
City sources said the Takeover Panel had forced Springer to show its hand. An official denial of interest would have barred the company from mounting a bid for up to a year. However, Springer's statement stressed that it had not made an offer and was not "in a position to know whether it would make an offer".
Analysts said the group would have to bid at least 255p a share for Mirror Group to have any chance of taking control. However they pointed out that shareholders would be sympathetic to a bid for the underperforming group.
City observers added that Springer's expression of interest, however tentative, had effectively put Mirror Group into play and could prompt other bidders to enter the fray.
Mirror Group shares gained 6.5p to 218p. Buoyed by takeover speculation, they have risen from around 190p in recent weeks.
Axel Springer, Germany's largest newspaper publishing group, is run by Gus Fischer, a former chief operating officer of Rupert Murdoch's News Corporation. It is controlled by the Springer family and Kirch, the media conglomerate.
In the past, Mr Fischer has made no secret of his plans to expand the group's interests overseas. Mirror Group, which is under increasing pressure to come up with new options for growth, would be an obvious target. Even though Mr Montgomery has expanded into regional newspapers through the acquisition of Midland Independent Newspapers - publishers of the Birmingham Post - last year, and recently sold the group's stake in the The Independent titles, the market remains unconvinced about his strategy.
Even the arrival of Kelvin Mackenzie, the former Sun editor who is now deputy chief executive of the company with responsibility for its newspaper titles, has failed to restore the market's confidence. Mirror Group has also warned that recent changes to the way television channels are sold could force it to close L!VE TV, its cable television station.
Any takeover would mean a huge pay bonanza for Mr Montgomery and his fellow executives. Mr Montgomery has a two-year rolling contract which would pay him over pounds 1m if it was terminated. Mr Mackenzie could expect to receive about pounds 600,000.
Mr Montgomery also has shares and options which would bring in another pounds 640,000, while Mr Mackenzie could expect to receive about pounds 380,000. Meanwhile Charlie Wilson, a long-standing Mirror executive who retired earlier this year, would make about pounds 1.7m from his shares and share options.
A source close to Mirror Group said: "If there was an offer we would give it due consideration in the best interests of our shareholders."