SHARES in MFS Technology rocketed to their highest level in at least 18 months yesterday after the company revealed that it is in preliminary merger talks.

The stock rose 15.5 cents to close at $1.04 after the company, which makes printed circuit boards, said it was having discussions with an unnamed party.

MFS' disclosure came in response to Singapore Exchange (SGX) queries on the recent hike in its share price - up 23 cents in a month - and the sharply increased trading volumes. The stock was one of the most heavily traded yesterday with about 46 million shareschanging hands.

MFS told the SGX yesterday that it 'has been in preliminary discussions, which may potentially lead to a scheme of arrangement for a merger or a general offer for all the shares of the company'.

Local dealers speculated that the interested party may be Nasdaq-listed Multi-Fineline Electronix, a sister firm of MFS and one that might offer to buy it at a premium.

These rumours may have helped fuel the 29.2 per cent jump in MFS shares over the last five trading days. The stock has climbed 37.7 per cent since the start of the year.

MFS and Multi-Fineline are units of Singapore-listed WBL Corp, whose shares have also soared - about 62.5 per cent in three months - closing at $5.85 yesterday.

MFS said that it was uncertain if a deal would result from the talks: 'The discussions have not been concluded. There are many unresolved issues and the directors have not approved any transaction.'

Analysts said a merger between MFS and Multi-Fineline made sense as they operate in the same industry and even have similar major customers, such as mobile phone giant Motorola.

'They both share similarities, and to a large extent, duplicate each other's space,' noted CIMB-GK Research analyst Gary Ng yesterday.