A leading non-refining sugar distributor in the UK, Napier Brown told shareholders yesterday that the talks "may or may not lead to an offer".
The news follows swiftly on from provisional clearance by the UK authorities given for Napier to merge with fellow sugar distributor James Budgett Sugars.
Announcing the clearance last month, the commission voiced concerns about the lack of competition in the UK sugar market.
"We found that only in a small number of cases were NBF and JBS each other's main competitor and that, even after the merger, market power will still be very substantially in the hands of the two UK sugar producers, British Sugar and Tate & Lyle," said Christopher Clarke, chairman of the inquiry group.
Reports in the British press say shares in Aim-listed Napier Brown Foods, jumped 20p to 200p yesterday after the company confirmed speculation of takeover talks.
Any deal, says a Guardian report, will require the backing of the Ridgwell family, which still controls around 50 per cent of the company.
The firm has annual turnover in the region £200m and supplies the industrial sector with a range of sugar, dairy and nut products, used in the manufacture of items such as biscuits, cakes, chocolate, ice cream, confectionery, soft drinks and cereals.
It also manufactures products such as sugar pastes and fillings, marzipans, nut products, caramels, toffees, fudges and mallows.