According to reports in the Financial Times, interest in the company was sparked by a second-quarter profits warning, prompting traders to suggest that the company could be vulnerable to a takeover bid.

M-real declined to comment on the speculation.

However, this latest rumour follows reports in March of this year, which claimed that fellow paper manufacturer Stora Enso could look to merge with or buy M-real.

Last week’s newspaper speculation coincided with M-real’s Capital Markets Day event on 29-30 May, where chief executive Mikko Helander spoke of the key opportunities and challenges facing the paper industry.

According to Helander, between 6-10% of European paper capacity would be withdrawn by the end of 2007 and “consolidation is needed to improve the market dynamics in Europe”.

He added that this was being driven by the fact that the industry had experienced overcapacity in Europe, alongside heavy investment requirements, all in a market where prices have fallen by 20-25% in recent years.

Meanwhile, M-real, which is part of the Metsäliitto Group, has sold two of its carton subsidiaries. The 160-staff Tako Carton Plant was sold to Finnish packaging and paper group Pyroll and the 420-staff Petöfi Nyomda site in Hungary was sold to the German STI Group.