Shares in Talk Talk leapt 16.5 per cent after the telecoms firm revealed that it had received a buyout offer from asset manager Toscafund.
The offer, which prices the internet operator at 97p per share, comes with a number of conditions attached, including the support of chairman Sir Charles Dunstone.
The deal values the firm at considerably lower than the 135p Toscafund had reportedly offered for Talk Talk last year.
Talk Talk’s board said that it would consider the proposal.
London-based Toscafund has assets of around £4bn and is run by ex-Tiger Management banker Martin Hughes, who is known as the “Rottweiler”.
Talk Talk is dwarfed by rivals such as Sky and BT, so has long been considered a takeover target.
“Efforts to create its own nationwide fibre network so it didn’t have to rely on BT’s infrastructure have also failed to come to fruition.”
AJ Bell investment director Russ Mould said: “Talk Talk was always positioned as the cheaper alternative to the likes of BT, Sky and Virgin Media for broadband and other services but ultimately it struggled to gain traction in a highly competitive marketplace and growth has really stalled in recent years.
Neil Wilson, chief markets analyst at Markets.com, said: “Dunstone needs to approve the takeover for it pass.
“With no discount and no premium in the price this morning, the market seems to think he is.
“There were signs of something afoot in the summer – Dunstone purchased 1m additional shares at the end of June at 86p after Tosca raised its stake to 29 per cent.”
He added that the company had also enjoyed good cash growth recently on better fibre rates and cash control.
Toscafund must announce an intention to make an offer for the firm by 5 November.