Restaurant operator Groupe Chez Gerard has confirmed it is in takeover talks, just a day after saying it would welcome an offer.

The group, which runs the Livebait and Chez Gerard restaurant chains, said it had been approached by the former pub operator Paramount.

News of the potential bid sent Chez Gerard shares up 26%, a welcome boost after a string of profit warnings and bad news halved their value in the past 18 months.

Paramount said it was considering offering a "significant premium" to the group's current share price.

A timely offer

Groupe Chez Gerard, which has the majority of its sites in London, has been hit hard by the fall in tourism since September 11.

The restaurant group operates the Chez Gerard steak-frites restaurants, the Livebait fish chain, and a handful of one-off restaurants including Bertorelli's and Soho Soho.

But it has been forced to stall expansion and sell five restaurants in the past year in an attempt to stem its losses.

In the 12 months to June 2002, it reported a loss of �3.4m, against a profit of �2m a year earlier.

The company's chairman Neville Abraham said earlier this week: "Trading is even tougher at the moment," and admitted he would welcome a bid.

A day later, his wish was granted.

"The board was contacted by Paramount yesterday and a meeting has been arranged to discuss their intentions," the group said on Wednesday.

From beer to chips

Paramount already owns a 3.2% stake in Group Chez Gerard, and claims to have the support of almost 48% of its shareholders.

One of if non-executive directors, Christopher Mills, is also a director at JO Hambro, the fund manager which owns 24% of Groupe Chez Gerard.

The company, listed on the Alternative Investment Market, is effectively a "cash shell", having sold its Real Inns pub estate for �19.6m two years ago.

Paramount said it would now examine the restaurant chain's accounts with a view to making an offer, at "a significant premium".

Shares in Groupe Chez Gerard leapt 26% or 16.5 pence to 79.5p.

Two years ago, before the company's rapid expansion and subsequent troubles, its shares were valued at over 160p.