Shares in troubled banking group Abbey National rose 16 per cent today after it confirmed it had received a takeover approach.
The stock jumped to more than 570p, valuing Abbey at just over £8 billion, after it said an unnamed party had made an approach "which may or may not lead to an offer being made for the company."
An Abbey spokeswoman refused to give details, saying only that it would make an announcement "in due course as appropriate".
City speculation about the potential bidder immediately focused on Spain's biggest bank, Banco Santander Central Hispano (BSCH).
A newspaper report in May claimed that BSCH had expressed interest in a takeover of Abbey.
BSCH did not make an offer and discussions were not thought to have progressed beyond the initial stage, the report said.
Hilary Cook, of Barclays Stockbrokers, said Santander appeared to be the most likely bidder.
"If Santander has aspirations of being pan-European, it needs to be in the UK," she said.
"If it comes out with a generous offer, it will be tough for Abbey not to justify offering it to shareholders."
Market talk also focused on the possibility of a renewed approach from a UK bank.
In 2001, Lloyds TSB failed in an £18 billion bid for Abbey after the Government blocked the move on competition concerns.
Alex Scott, of Seven Investment Management, said he would be surprised if a foreign bank was prepared to enter the competitive UK market with a sixth-placed bank like Abbey.
"That may suggest that one of the domestic banks thinks it could get a deal past the competition authorities," Mr Scott said.
Abbey's share price has fluctuated widely in recent months as rumours about approaches for the bank circulated among City investors.
The group has shed jobs, sold non-core assets and reorganised its operations in a three year overhaul designed to reverse two years of heavy losses.
It has insisted it would show a return to the black in the current financial year after losses hit £686 million in 2003 and £947 million in the year before that.
The group endured a rough ride from investors at its annual meeting amid renewed concerns over its recovery.
It has also faced criticism over its new corporate image, which ditched the second part of its name and its traditional "couple under an umbrella" logo in favour of the single title Abbey.
The group - the UK's second biggest provider of mortgages and savings - floated in 1989 and is the sixth largest bank by assets in Britain, the 16th largest in Europe and the world's 30th largest.
Its main offices are in London, Milton Keynes, Bradford, Glasgow and Edinburgh. It employed about 25,900 people at the end of last year and it has some 1.8 million shareholders.Reuse content