(Bloomberg) -- French building materials producer Cie. de Saint-Gobain is exploring a potential acquisition of CSR Ltd., people familiar with the matter said, sending shares of the Australian company up the most in nearly 32 years.

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The two companies have held initial talks and are working with advisers to reach a deal, said the people, who asked not to be identified because the matter is private. Paris-based St. Gobain has lined up financing for a potential transaction, the people said.

CSR’s shares surged as much as 18% in Sydney to A$8.02, the highest since June 2008, after the Bloomberg News report. Trading was then halted pending an announcement “in relation to receipt of a proposal regarding a potential material transaction,” CSR said in an exchange filing. The company’s market value rose to A$3.8 billion ($2.5 billion).

St. Gobain’s Sydney office didn’t respond to requests for comment and representatives for the company in Paris didn’t reply to messages outside regular office hours.

An acquisition of CSR could help St. Gobain diversify and boost growth in residential and commercial building products in Australia and New Zealand. Deliberations are ongoing and may not lead to a transaction, the people said.

St. Gobain’s shares have climbed 29% in the past year, lifting the French company’s market value to almost €35 billion ($38 billion).

St. Gobain employs 168,000 staff and has operations in 75 countries, according to its website. In addition to construction materials, the firm says it makes windows and parts for the automotive and wider transport sector, as well as products used in other industries such as health care.



CSR was founded in 1855 and its brands include Gyprock plasterboard and Bradford Insulation, according to its website. It has 2,600 employees in Australia and New Zealand.

--With assistance from Harry Brumpton.

(Updates with CSR’s response in third paragraph and more information about the companies in last two paragraphs.)

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