Shares in engineering group Powerscreen International rose 451/2 p sterling to 1491/2p sterling (€2.23) in London following an announcement that it was in talks which may or may not lead to an offer being made for the company.

There was speculation in the market that the company may be trying to put together a management buyout.

On yesterday's performance the company is currently valued at £139 million sterling (£164 million). Any buyer would have to pay well in excess of this figure to convince shareholders to sell. A multiple of ten times this year's forecast earnings per share is seen as a fair price and would value Powerscreen at more than 220p sterling per share or £204 million sterling (£240 million).

Other potential purchasers mentioned include cement manufacturer Sean Quinn, and US and British interests JCB and John Deere, which bought Powerscreen's Matbro assets. However, last night a spokeswoman for the Sean Quinn group, which is the biggest single shareholder in the group with a 6 per cent stake, said the company was not associated with the offer. Powerscreen's shares jumped by nearly 25 per cent last November following reports that a US company was interested in its acquisition.

Shares in the Dungannon-based group began trading yesterday at 105p sterling, but rose quickly when the announcement was made, before closing at 1491/2p sterling.

The brief Powerscreen statement said that a further announcement would be made in due course and that Merrill Lynch was acting for the company. Sources said last night that the company's future was still under scrutiny, following profit warnings in January last year, due to accounting irregularities in Matbro, a group subsidiary.

Merrill Lynch International's managing director, Mr Philip Yates, said last night that a serious proposal had been made and the management was obliged to consider it. He added that it was a proposal rather than a firm offer and the board would now have to consider whether it represented fair value for shareholders.

Mr Yates added that a decision would be reached in a matter of weeks rather than months.

Other sources said the share price had risen yesterday and the company had decided to make the announcement, given its recent history.

Powerscreen issued two profit warnings which saw the company post a pre-tax loss of £65 million sterling for 1997, compared to a £45 million profit in 1996. The company is also being investigated by the Serious Fraud Office in London, the Department of Trade & Industry (DTI) and the London Stock Exchange.

Since then a new management team has taken over and streamlined the company, disposing of many non-core assets. Disposals have raised £46 million for the group and debt has been reduced to £14 million.

"Several parties, including venture capitalists have run the rule over Powerscreen in recent months," said one source. "A management buyout is a distinct possibility because the market is awash with money looking for a home."