The race for Scottish Power intensified yesterday amid reports that neighbour Scottish & Southern Energy (SSE) was considering a possible merger.
According to one report, SSE has appointed advisors to evaluate a tie-up which would establish a £19 billion utility giant.
The merger speculation came as Scottish Power was said to have entered formal talks over a bid thought to be worth up to £12 billion by Eon, the German owner of Powergen.
In September, the Takeover Panel forced Eon to announce to the stock market that it was " considering its options regarding a possible takeover of Scottish Power".
Last week, it reportedly entered talks with Scottish Power over a bid worth 610p to 640p a share. Shares in Scottish Power closed at 560p on Friday, valuing it at £10.5 billion.
An announcement confirming the talks could be made this week, with both Eon and Scottish Power reporting results on Thursday.
A takeover could require the approval of competition authorities as a combined Scottish Power and Powergen business would have nearly 16 million customers.
And a tie-up between SSE and Scottish Power would alleviate political concerns in Scotland over one of the country's biggest corporate names coming under foreign ownership.
But this too could have problems getting past energy regulators. Between them, Scottish Power and SSE account for about 70 per cent of Scotland's gas and electricity customers.
Both companies declined to comment yesterday, but it is understood that SSE has yet to approach Scottish Power.
Scottish Power has been seen as vulnerable to a takeover since May, when it agreed to sell its US subsidiary Pacificorp for £2.9 billion to MidAmerican, the energy business controlled by billionaire financier Warren Buffett.
Shares in Scottish Power recently reached their highest level since the spring of 2001, closing at 587p on October 6.
It achieves more than half of its business outside its heartland north of the border and posted profits of more than £596 million last year.
Barclays forecast Scottish Power to announce interim pre-tax profits of £280 million on Thursday.
SSE, which owns Southern Electric, Scottish Hydro Electric and Swalec, employs 10,000 people in the UK and claims to be Britain's largest generator of energy from renewable sources.