July 22 (Bloomberg) -- Paragon Group Cos., a provider of mortgages to British landlords, rose the most in six months in London trading after saying it is in takeover talks.

Paragon gained 31 percent to 110 pence, valuing the company at about 312 million pounds ($625 million). The lender is in discussions with bidders including Blackstone Group LP about a possible offer, two people familiar with the talks said today.

``Paragon has put itself up for sale and is now reviewing some of the offers,'' said James Hutson, a London-based analyst at Keefe, Bruyette & Woods Ltd. ``It is trading at a significant discount to its book value and has exemplary credit quality,'' said Hutson, who has a ``market perform'' rating on Paragon and estimates the company is worth 150 pence a share.

Paragon stopped lending in March as the cost of wholesale funding surged in the wake of the credit crunch. The Solihull, England-based company depends on that funding from money markets and bond investors to fund its lending. The stock has dropped 52 percent this year.

Blackstone has yet to make an offer, said the people who declined to be identified because the matter is confidential. David Blitzer, head of Blackstone's London office, is leading the talks, according to the Financial Times, which reported the talks earlier today.

A spokeswoman for Blackstone, the New York-based manager of the world's biggest buyout fund, declined to comment, as did a spokesman for Paragon. Paragon said in its statement it would share information with potential suitors.

Potential Offers

``In view of the recent press speculation, the board of Paragon confirms that it has received approaches from parties who have expressed interest in evaluating potential offers for the company,'' Paragon said today in a statement. ``There can be no certainty that these discussions will lead to any offer being forthcoming.''

Net income fell 40 percent to 18.4 million pounds in the six months ended March 31. Fiscal third-quarter profit met Paragon's forecasts and the company is ``financially strong and well positioned'' to endure the U.K. slowdown, it said last week.

To contact the reporter on this story: Ben Livesey in London blivesey@bloomberg.net

Last Updated: July 22, 2008 11:45 EDT