Shares in Allders Plc, Britain's fourth biggest department store group, soared almost 16 per cent today on news that the company has received a preliminary approach that could lead to a cash offer.

Responding to earlier newspaper reports that bid was in the works, Allders issued a statement confirming that "discussions are at an early stage."

The bidder is believed to be acquisitive Icelandic retailer Baugur, although its chairman Jon Asgeir Johannesson told Reuters he would neither confirm nor deny that his company was behind the approach to Allders.

Since losing a bid in August for British retailer Arcadia Group, owner of the Topshop and Dorothy Perkins brands, Baugur has upped its investment in the UK retail sector. Most recently, it raised its stake in UK department store group House of Fraser to over seven per cent.