ALLIED Irish Banks is interested in buying the British Co-operative Bank for a price estimated between £250 million and £300 million sterling.

The Co-operative Bank is part of the Co-operative Wholesale Society (CWS), the target of a £1 billion bid from entrepreneur Mr Andrew Regan.

A spokeswoman for AIB said the bank would be interested if the co-op were to come up for sale. However, she insisted that no agreement had yet been reached.

We are both aware of one another and there have been discussions," she added.

Mr Tom Mulcahy, chief executive of AIB, is understood to have been involved in the negotiations to buy the Co-operative Bank, one of the best performing parts of the co-op empire.

The move would leapfrog AIB into the British market. Bank of Ireland last year announced a £600 million deal to take over Britain's ninth-largest building society, Bristol & West.

AIB has been in acquisitive mood recently, with an £840 million takeover of the US Dauphin Deposit Corporation as well as £47.4 million to take control of Polish bank WBK.

Most bank purchases in Britain have recently been for around 2.1 or 2.2 times the book value. That would imply a price of about £270 million to £290 million.

However, some reports have the amount as low as £220 million and as high as £400 million.

Last year, AIB achieved good profit growth in Britain. The improved business climate and the renewed activity in the economy helped in-branch lendings grow by 11.7 per cent and deposits by 10.1 per cent. This is likely to have persuaded AIB to look for further exposure.

Mr Regan (31), is head of Lanica Trust, a Guernsey-registered investment trust. Galileo is the Lanica Trust vehicle that is interested in buying some of the Co-operative businesses.

The Galileo bid is expected this week, having suffered a last minute hitch following a court injunction from CWS. It has been coming under pressure from Mr Regan to sell some of its main businesses to him.

Galileo would also be keen to sell off the supermarket division of CWS and its insurance arm. However, the bank deal is reportedly the only one that has been "pre-sold".

Last week, CWS suspended two of its most senior executives in its food retailing arm. It said there has been a suspected recent serious breach of trust".

The mutually owned business said it had commissioned an external investigation into business dealings since 1994 between divisions managed by the two men and companies controlled by Mr Regan.

Hobson, a company run by Mr Regan, bought CWS's food manufacturing businesses in 1994 for £111 million.

The inquiry is believed to be concerned with payments made when a supply contract was extended as part of the deal. CWS alleges that payments were made to a Cayman Islands registered company. Hobson was later sold for £121 million to Hillsdown Holdings, the food group.

Mr Graham Melmoth, chief executive of CWS, has reportedly written to Lord Hambro, chairman of Hambros Bank, which is advising Lanica on its bid for CWS, asking that he investigate the matter immediately.

Lanica's shares were suspended in February as speculation grew about a deal with CWS. They had soared after Mr Regan assumed control last year. They last traded at £19.50, giving the trust a market value of £82 million, in spite of having a net asset value of only £3.2 million.