A POTENTIAL multi-billion-pound takeover of one of Hampshire's most successful businesses may be less than a fortnight away from being formalised.

As previously reported in the Daily Echo, South Africa's largest insurer, Old Mutual, has been linked with a £7.7 billion tie-up with Swedish insurer Skandia, which employs 1,700 people in Southampton.

Old Mutual says it is under no pressure to buy Skandia, which has one million policyholders in the UK and is now a major player as one of Britain's top ten life insurers.

But Jim Sutcliffe, the chief executive of Old Mutual, admitted that there are "serious" talks going on to buy Skandia, which includes the jewel-in-the-crown UK arm.

Although stressing these talks are at an early stage, he added: "It's got to be at the right price. It's got to be value creating. We are not at that point yet."

However, there was mounting speculation on the Internet that Old Mutual might formalise its offer to Skandia within two weeks, although nothing has been set in stone.

The Southampton operations, which accounted for 60 per cent of Skandia's group profits last year, have been singled out by an admiring Sutcliffe.

He said: "The Swedish company is very similar in broad outline to our South African company. The UK is a fine operation. They have got very interesting growth prospects in continental Europe."

Sutcliffe said he decided to probe a Skandia deal after the Swedish insurer said it was considering its options.

He said: "They fired the gun. They (gave) a press interview in December saying they were thinking about their options."

Old Mutual is keen to expand in the UK, where

it would complement Old Mutual's small UK

mutual fund operation.

The UK arm, led by Southampton-based Nick Poyntz-Wright, raked in £160m profit last year and has some £21bn worth of assets under management.

Skandia's group boss, Hans-Erik Andersson, has downplayed the bid talk, saying Skandia has viable prospects to continue as a standalone.

But, in another twist, rumours have also been growing that Norwegian bank DnB NOR ASA may be preparing a counter-bid.

In a separate development, Skandia UK is writing to affected policyholders after accidentally overcharging them over pension policy fees.

Skandia, which blamed computer error, stressed that all shortfalls will be made good.

Some 16,370 policyholders were said to have been overcharged over a 14-year period. In many cases the sums involved less than £100, a spokesman said.

Meanwhile, outside of the UK, Skandia has offered the equivalent of £52.1m to settle its involvement in a probe by US authorities into alleged illicit trading in the mutual fund sector.

By making the offer, American Skandia neither admits nor denies liability, the Swedish insurer said in a statement.