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Spanish utility Iberdrola (IBE.MC: Quote, Profile, Research) has approached Scottish Power Plc (SPW.L: Quote, Profile, Research) about a possible bid for Britain's fifth-largest energy supplier, sources close to the situation said on Wednesday.
Earlier, Scottish Power said it had received an approach "which may or may not lead to an offer being made." Its stock rose more than 18 percent before closing 8.7 percent up at 737 pence, valuing it at about 11 billion pounds ($21 billion).
Scottish Power had said its board would study any offer when the time came.
"Iberdrola has approached Scottish Power about a possible offer," one of the sources said.
Iberdrola said earlier on Wednesday it had not presented a bid for Scottish Power. A company spokesman declined to comment on whether the Spanish company had made an approach.
Iberdrola had hoped to grow in size by picking up assets sold if Spanish rival Gas Natural (GAS.MC: Quote, Profile, Research) bought the country's largest utility, Endesa (ELE.MC: Quote, Profile, Research).
However, Gas Natural's bid has been trumped by German utility E.ON (EONG.DE: Quote, Profile, Research) and frozen by two court cases, so it is widely believed to be as good as dead.
Media have reported that other European power groups have been eyeing Iberdrola, Spain's second largest utility, as they look for international growth in a fast-growing market.
In September, construction group ACS (ACS.MC: Quote, Profile, Research) bought a 10 percent stake in Iberdrola, which some media said was a defensive move against an imminent bid from abroad.
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