Old English in takeover talks

Old English Inns has said it is in preliminary talks about a possible takeover of the company.<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" /?>

In a brief statement to the London Stock Exchange, the pub and restaurant group confirmed it was in discussions "which may or may not lead to a possible offer".

Shares in the company soared by 25% after the announcement.

The company has 129 outlets, including a network of rural inns. It has been vulnerable to a takeover since June, when it reported a £3m drop in full-year profits to £2.8m.

It blamed a combination of last autumn's fuel crisis, foot-and-mouth, floods and general bad weather for the decline in profits.

But the company, led by chairman Eric Walters, was more upbeat at its annual general meeting last month, saying like-for-like sales in the 13 weeks to 1 July had risen by 3.7% on the previous year.

While the company has declined to reveal who the mystery suitor might be, speculation is focusing on entrepreneur Robert Breare's Noble House leisure group.

Breare is known to be keen to build up a portfolio of managed pubs across the country.

Last year, he targeted Wolverhampton & Dudley, eventually joining forces with pub group Pubmaster.

But that move failed this week after W&D shareholders rejected Pubmaster's £485m bid.

And in June Scottish & Newcastle sold 646 managed pubs for £354m to Breare and Enterprise Inns.