HBOS continues to be linked with Erinaceous group, despite reports last week that the bank was poised to withdraw from the takeover race.

Shares in the property group fell further to 175p on Monday – their lowest mark since late 2004 – following a 5% dive on Friday last week.

A spokesman denied that the fall was linked to speculation of HBOS’s withdrawal, and confirmed that talks relating to a potential acquisition were ongoing.

“It is significant that the share price began falling before the speculation that HBOS was backing off,” the spokesman said.

It is believed that a meeting between Erinaceous and HBOS officials took place last Wednesday.

Erinaceous has been embroiled in takeover talk since 3i tabled a £300m bid in April. It has since been hit by a spate of defections, including insurance chiefs Andy Halstead and Nick Crocker (News, 2 August).

One market source said that the loss could “seriously undermine” HBOS’s business case for purchasing the group, and reiterated concerns that Erinaceous was struggling to integrate a slew of recent acquisitions.

HBOS refused to comment.