Shares in the British software group Zergo soared on the London stock market yesterday after Zergo confirmed that it is in merger talks with Baltimore Technologies, the Irish software company that is 60 per cent-owned by financier, Mr Dermot Desmond.
Zergo shares jumped 621/2p to 3571/2p sterling, valuing the British company at £40.8 million sterling (£45 million).
Zergo said that the discussions with Baltimore are at a "preliminary" stage and appended the usual cautionary warning that they "may or may not lead to a merger" of the two groups.
The reaction in the market, however, suggests that investors believe that a merger is likely.
The rise in the share price, however, is unwelcome news for Baltimore, as the planned merger will probably be structured through a reverse take-over of Zergo by the Irish company and the higher the Zergo share price goes the lower will be the Baltimore holding in the enlarged company.
Market sources have speculated that prior to the rise in the Zergo share price yesterday, Zergo shareholders would own slightly more than 50 per cent of the merged group. This suggests that the merged company could have a market capitalisation in excess of £90 million.
