offered by the Bank of Bermuda Ltd. for Bermuda Home Ltd., according to sources familiar with the discussions.

"They believe Bermuda Home shareholders are not getting the best value they could get for their shares,'' a source said. "Although the Bank of Bermuda say they are giving a good price, the potential bidder believes they are getting it cheaply. Shareholders are getting a raw deal. A real premium would be ten times earnings, say $19 to $19.50.'' It's understood the company is considering a bid of between $17 to $19.

It's not known if the potential bid is an attempt to spoil the bank's chances of taking over Bermuda Home, make the bank's acquisition more expensive, or whether it is a real attempt to consolidate the deposit taking and mortgage market on the Island through merging with a competitor.

Currently the market belongs to Bermuda Home, Butterfield Mortgage & Finance, Gibbons Deposit Co. Ltd., and Bermuda Savings & Loans Ltd.

A Bank of Bermuda spokesperson said there was "no apparent substance'' to what it labelled as a rumour.

The Bank of Bermuda offer of $15.25 per share values Bermuda Home at $83.8 million representing a 38.6 percent premium on the outstanding common shares and 22 percent on the preferred shares.

The source said at $15.25 the bank is buying the company at an estimated 7.86 times earnings based on projections. The company's book value per share is about $12.70. A $15.25 price represents 1.2 times book.

"That's very cheap,'' he said.

A local analyst, who did not want to be named, said the Bank of Bermuda offer was good value for the shareholders considering the fact that the shares did not trade often, and that Bermuda Home financial figures indicated the company could be in for a profit squeeze in the future.

"It's a good company and a good franchise but that's predicated on the belief that the Bermuda mortgage market will grow in the future,'' he said. "There are possible operations problems on the horizon as the company is taking in deposits faster than it's lending out.'' He said that any competition to bid on the shares from a rival would be even better for shareholders who stand a chance of getting a higher price. However, he said such an attempt would be "pretty expensive'' if it failed, especially since the bank already controlled so much of the stock. The bank already owns about 25 percent of the common stock and has an agreement to purchase another 33 percent from directors and officers, giving it in principle 58 percent control. Along with voting rights from some of the 18 percent of common stock it holds as a nominee, the bank is short about 200,000 shares from achieving the minimum 75 percent vote it requires to amalgamate with Bermuda Home.

The bank also holds about 26 percent of the preferred stock and has an agreement to purchase 28 percent from directors and officers, giving it in principle about 54 percent. Along with some of the about 22 percent it holds as nominee the bank is still short of the 75 percent requirement.

The offer of $15.25 percent is only in force if the bank has agreements in place enabling it to reach the 75 percent minimum by January 31.