SHARES IN insurance company FBD gained almost 16.5 per cent to close at €34 last night on news of a preliminary approach from Dutch financial giant Eureko at about €36 per share.

Crucial to the prospects of any bid from that quarter will be the views of some 4,500 shareholders in Farmer Business Development, a plc which holds 25.68 per cent of the company.

Eureko's proposal is believed to include a form of partnership with Farmer Business Developments and FBD Trust Co, a separately managed charity which holds 8.98 per cent of the insurer. Such a strategy is implied in a stock market notification from FBD which said the approach "appears to differentiate among shareholders and is highly conditional".

There was no comment from FBD itself beyond the statement noting the approach, which said there could be no certainty of a formal offer or any transaction.

Neither was there any comment from Eureko, which owns Friends First in the Republic. As a general rule, said a spokeswoman, Eureko typically examines transactions that would be earnings enhancing and would be in line with overall strategy.

The combined interest of Farmer Business Developments and FBD Trust would be strong enough to block any bid, but their views are not known at this time.

NCB analysts John Cantwell and David Odlum said in a note that any takeover is likely to be at a significant premium to FBD closing share price on Friday - €29.20 - given the scale of the stakes held by these two groups.

They said the Friends First business would complement FBD's operation. "Friends First has offices in Dublin, Cork and Galway and operates life and pensions, asset finance and loans businesses. Its life and pensions business is sourced through independent brokers and relationships with financial institutions.

"Friends First had €246 million in non-life gross written premiums in 2006 which compares to FBD with gross written premiums of €407.3 million in that year. Eureko has highlighted it is intent on building an integrated, pan-European group consisting of market leaders in the territories in which it operates. An acquisition of FBD would put it in a position to significantly increase its position in Ireland."

Prior to news of the Eureko approach at the weekend, FBD shares had already risen by 14.5 per cent since the start of the year in a market in which financial stocks at large declined 10 per cent in the same period.

A spokeswoman said last night that Farmer Business Development had no comment to make on the preliminary approach from Eureko. She was unable to say whether the support of a simple majority of its equity-holders or a higher majority would be required for the organisation to engage in any transaction with Eureko.

Reports that a firm separate from Eureko was building a stake in FBD via contracts for difference with London investment bank Kleinwort Benson could not be confirmed last night. Kleinwort Benson is controlled by Dresdner Bank and Allianz, which owns some 5.5 per cent of FBD.