When the board of Kensington, the majority owner of Start Mortgages, accepted a �283m offer from Investec at the end of May/first of the month, it raised the prospect of one investor controlling two of the five current Irish subprime mortgage lenders.

Investec already holds 60% of Nua Homeloans, a joint venture with specialist lender Finance Ireland which opened for business in April, and Kensington's 64% stake in Start will transfer to the South African investment bank when the takeover goes through.

But Investec won't be able to keep both stakes, since Nua's shareholder agreement does not permit its majority owner to operate two brands in the Irish market. That means Investec would have to merge Start and Nua or dispose of one of its stakes.

Shortly after the prospective takeover was announced, Finance Ireland chief executive Billy Kane told the Sunday Tribune that Investec was "fully committed" to Nua and that the lender would continue business as usual until the deal closed. He couldn't say which brand was more likely to undergo a change of ownership, but he did pour cold water on the notion of a Start-Nua tie-up.

"I don't believe putting the businesses together is in our own interests -- it would be a case of 2+2=3, " he said. "It wouldn't be good for Nua shareholders."

One analyst at a Dublin brokerage who did not want to be named did say a Start-Nua merger would be a logical fit in terms of scale, however, assuming Investec could successfully mesh their two systems. But he cautioned that the minority owners would have to be bought out at a hefty multiple and that very little was known about Investec's intentions in Ireland at this stage.

A more likely scenario, according to Marc McGovern, a Davy analyst who covers the subprime sector, would involve Start's management, who collectively own the 36% minority stake in the business, exercising its buy-out option or finding another partner to take over Investec's stake - "Kensington's Irish operations are very attractive, " he said.

Indeed, while Kensington has been struggling in the UK, Start has been steaming ahead in Ireland. The mortgage provider doubled its business completions in 2006, just as a host of new players - including Nua, Irish Life & Permanent and IIB - were preparing to get into the game for 2007, hoping to get a piece a market expected to grow from Euro1bn to Euro4bn in the next three years.

Start also completed a securitisation of its Euro525m "non-conforming" loan book - a first in Ireland. Investec's chief executive Stephen Koseff has said his firm is looking to Kensington for a platform to extend its securitisation business - worth �3bn (Euro4.4bn) over the last 18 months - so it is not out of the question that Investec would hang on to Start for the flow of regular fees to its bond desk Start was founded in 2004 by five defectors from GE Money who approached Kensington for backing because of the UK company's treasury expertise. Lenders are interested in subprime because mainstream lending is plateauing and subprime offers fatter margins and steeper growth; investment banks interested in subprime because of the money to be made in repackaging the loan portfolios and selling slices to investors to spread risk and generate fees.

As Davy's McGovern pointed out, however, Investec already has a deal with Nua to securitise its first Euro250m in loans - a threshold the new lender is aiming to reach in its first year of business - so Start's securitisation track record might not be decisive. While Start's portfolio was regarded as especially good quality in a market where subprime repackagings (especially in the US) have lately included large measures of junk, Nua is likely to deliver a high standard, he said.

Moreover, the strength of Nua's board - featuring an experienced managing director in Declan Fitzpatrick, former IL&P chief Kane and Investec executives Michael Cullen and Alan Byrne - makes the newcomer a good long term bet for Investec, which has signalled its commitment to the subprime market in Ireland. In the year to the end of March, Investec saw its Irish pre-tax profits jump 147% to Euro24m.

One potential wrinkle exists for Investec apart from rejigging its Irish interests: Kensington shareholder Martin Feingold who set up the mortgage company in 1994 and retains about a 12% stake in the business, thinks the offered price of �283m is too low compared to Kensington's market high of last year, when it was valued at nearly twice that figure.

He is reportedly seeking a different buyer, with Morgan Stanley - which recently ran the rule over Kensington - mentioned among potential suitors.