Telecom Eireann, which is gearing up for its June/July flotation, is set to make its biggest acquisition to date. It is in talks with Horizon Computer on a takeover which is likely to be worth over £60 million. Horizon has, it is understood, abandoned its own plans for a stock market flotation and the trade sale to Telecom is now likely.

A spokesman for Telecom would make no comment on the proposed acquisition, but it is understood that the negotiations are at a preliminary stage and a deal may not be completed for two or three months. Industry sources believe, however, that Telecom will be keen to complete the acquisition before the flotation of the company on the Dublin, London and New York stock markets in late June or early July.

There has been speculation for the best part of a year that Horizon would float on the stock market, and indeed a flotation was postponed last year after markets weakened in the wake of the crisis in the Far East economies. Now, however, the company and its controlling shareholder, Cork-born entrepreneur Samir Naji, seem to have opted for the simpler alternative of a trade sale to Telecom.

Horizon, which was valued at £45 million at the time of a £7.4 million private share placing last year, is one of the State's largest independent providers of computer services and information technology products, with a strong growth record in recent years. It has significant business in systems integration, distribution, training and consultancy in the SME sector. The group employs 230 people in Ireland, the UK and Europe.

Last year, Horizon generated pretax profits of £2.3 million on sales of £96.8 million and the group's financial adviser NCB has forecast pretax profits of £4.3 million and sales of £115 million in the current year. The group has grown rapidly through acquisition in recent years.

Industry sources said that the proposed acquisition of Horizon is in line with Telecom's diversification strategy. Last month, Telecom paid £8.5 million for LAN Communications, an Irish networking company and also paid £4 million for the Northern Ireland telecoms equipment supplier, Atlas Communications.

If the sale goes ahead, it will make a multimillionaire of the chief executive, Mr Naji, who founded Horizon 10 years ago. His 67 per cent stake in the company is worth more than £40 million based on the mooted £60 million-plus sale price to Telecom. The rest of the company is owned by institutional and private investors who stand to make sizeable profits on their investment.