Looking Into Sanctuary?

Sanctuary shares have leapt 40 percent to 16.25 pence, prompting speculation that the troubled U.K. music company is attracting interest from Warner and Universal.

The market’s reaction to Sanctuary’s May 18th announcement confirming it has received approaches from several third parties suggests the London Stock Exchange expects a bid much higher than the previous day’s closing price of 11.25 pence.

Although the company didn’t name the interested parties, The Guardian reported industry insiders naming U.S. giant Warner Music and Vivendi-owned Universal Music as the likeliest bidders.

The spike in the share price upped the company’s value to £37.2 million. And that figure looked to be on the rise as investors represented by Hargreave Hale Ltd. and Evolution Securities – the company Mean Fiddler nominated to handle its ill-fated October 2004 share disposal – began buying stock.

The shares edged further up to 17 pence during May 21st but settled to close back at 16.25 pence.

The Sanctuary board brushed aside interest from the AIM-listed Mama Group last summer because it didn’t take the offer seriously. But The Guardian suggests the struggling London-based company might still welcome a major-label takeover.

The last year has been a rocky ride for Sanctuary. The company sacked co-founder Andy Taylor, brought in former British Airways chief executive Bob Ayling as chairman to improve corporate governance, saw the departure of Rod Smallwood – another co-founder – and admitted it doesn’t expect to make a penny profit before the end of 2008.

Former chief exec Merck Mercuriadis resigned in October and the company cut costs by trimming back its U.S. operation.

Warner, which has reportedly offered EMI a £100 million sweetener if its bid for the U.K. major falls foul of the European regulators, has shown an interest in Sanctuary in the past but never made a bid.

The company’s recorded music division looks set for another disappointing year, thanks in part to high running costs and falling CD sales, but the U.K. media believes a major would still be interested in its music merchandising arm and an artist management roster that includes Elton John, Robert Plant, The Who, and James Blunt.