"He hasn't made a decision, but he's looking at the prospect," said one insider.
Mr Montgomery characterises the bid plan as "the next step" in a comeback not only for himself but also other City "outsiders". Mirror Group chairman Sir Victor Blank forced Mr Montgomery to resign last month after concluding that he had become an obstacle to selling the company in line with the wishes of Phillips & Drew Fund Management (PDFM), which holds a 22 per cent stake, and other major shareholders.
The first step in Mr Montgomery's comeback plan, according to people familiar with it, was the negotiation of a severance package worth pounds 1.4m.
Mirror Group's business is currently being studied by two declared potential bidders. Trinity, publisher of the Liverpool Daily Post and other titles, is close to making a new approach, according to City sources. Previous talks between Mirror and Trinity bogged down when Mr Montgomery balked at stepping aside to let Trinity chief executive Philip Graf run the combined company.
On January 18, Regional Independent Media, a newspaper chain backed by the venture capital group Candover, made an indicative offer of pounds 2 a share, valuing the Mirror Group at about pounds 1.1bn. But Mirror rejected it as too low. RIM/Candover is now considering bringing a higher bid to the table, according to City sources.
Mr Montgomery would enjoy an advantage over Trinity and RIM/Candover if his financial backing comes from outside the UK media industry. By law all bids by one British media company for another British media company are automatically subject to review by the Monopolies and Mergers Commission - a process that takes at least three months.
"Montgomery could wait until he sees the bids from Trinity and RIM/Candover, then, when those bids go under MMC review, come in, put his bid on the table, and say take it now."
Mr Montgomery denied he was planning a bid for the Mirror Group. "You're the third person to ring today about this rumour," he said. "It's rubbish."
Both the Mirror Group and PDFM said they knew nothing of Mr Montgomery's interest. But Mirror Group said that it would consider all bids in the interest of realising shareholder value. PDFM takes the view that Mr Montgomery remains a talented businessman for whom its door is always open.
Alerted to the possibility of a Montgomery bid, all parties concerned turned their attention to the question of who might back it. The general feeling was that German group Axel Springer is unlikely to emerge as a partner, but that, as one person put it, "Montgomery has a lot of friends in America."
Acknowledging that it would be consistent with Mr Montgomery's never- say-die character to attempt a dramatic comeback, most parties involved in discussions about Mirror's future expressed scepticism that he would be able to raise the pounds 1bn-plus necessary to mount a bid. "A billion is a lot of money," one said.
Mirror is due to report its annual results on March 4. The company expects that bids from Trinity and RIM/Candover could well emerge before then. PDFM is on record as saying that the true value of the company is worth somewhere in the vicinity of 250p per share. A straw poll of City analysts suggests the City values Mirror at between 230p and 240p per share.
"The funny thing is that PDFM might be prepared to take less for a cash and paper bid than a pure cash bid," said one source. "That would give PDFM a chance to realise a return and still look for value enhancement in the future."