Shares in Gaucho Grill surged 50% to 18p in response to news the company had received a takeover approach.

Gaucho Grill said it had received a 20p-a-share takeover offer, after turning in a loss of £700,000 for the year to December 31 2001, against a profit of £2.4m the year before.

It said in view of the continuing economic uncertainty it was suspending its expansion programme "until market conditions justify such a commitment."

Observers believe the offer is from the company's chairman and chief executive, Zeev Godik, and his associates, who already own 85% of Gaucho Grill. A further announcement is expected in "weeks rather than days", according to insiders.

Godik made a 35p a share offer last summer but his bid collapsed after the September 11 terrorist attacks in the United States.

The company, which owns restaurants in the UK and in Switzerland and the Netherlands, said like-for-like sales are still running at 4.1% down on the same period last year.

Several sites under contract are being disposed of and no sites are currently under development, the company said. The final figures for the year will suffer a one-off hit of £1.3m after losses on the disposal of restaurant sites and the cost of staff redundancies.

Turnover for the year rose 14.6% to £27.5m after six new openings, one in the UK, three in the Netherlands and two in Switzerland, took the company's total number of restaurants to 40. However, sales in all three markets were badly affected by consumer fears over BSE and foot-and-mouth, and a ban on beef from Argentina, the company's main source of supply. The events of September 11 compounded the problems, with fewer tourist customers, particularly in Central London and Zurich, where Gaucho Grill has its largest restaurants.

Bank borrowing increased by £2.5m, to finance new restaurant openings, giving the company £3m net debt at year-end.

The company now has 36 Gaucho Grills, eight in the UK, 20 in the Netherlands and eight in Switzerland, and four Down Mexico Way restaurants, one each in the UK and Switzerland and two in the Netherlands.