STOCKHOLM, Sept 28, 2001 (Reuters) - Swedish state-owned forestry company Sveaskog said on Friday it was in talks on making a possible bid for peer AssiDoman, sending AssiDoman's shares soaring and pushing the whole sector sharply higher. A takeover would be the first time a state owned company took over a listed one in Sweden and also the first in a series of expected mergers and strategic partnerships in the industry. The Swedish state now has 35.5 percent of AssiDoman. "Sveaskog AB has initiated talks with AssiDoman AB with the intention to ascertain the possibilities of making a public offer for all shares in AssiDoman," Sveaskog said sending AssiDoman shares up 17.5 percent to 262 crowns. A respected Swedish industry expert Ingemar Croon told Reuters in an interview earlier this week he expected Swedish forestry companies, AssiDoman among them, to consolidate in an effort to boost profitability at a time of low pulp prices. Media have also speculated that the world's biggest paper maker International Paper of the United States was in talks on buying the world's second biggest Stora Enso of Finalnd. "For (Assi Doman) shareholders such a bid can be very interesting," said Klas Wikblad, analyst at Aragon brokerage. "There seem to be no other buyers today and in this uncertain bourse situation, it is good to be able to sell at a good price. The bid is likely to contain a premium, possibly offering 250-260 crowns per share," he said. Sveaskog said it could bid for the part of AssiDoman which remained after the company carried out the planned demerger to shareholders of its Billerud subsidiary and after a planned 12 billion Swedish crowns ($1.13 billion) share redemption. "The intention is to conclude these talks as quickly as possible, after which additional information will be provided," it said. Sveaskog's Chairman Bo Dockered told Reuters it would take at least a week before the discussions between Sveaskog and AssiDoman are over and a bid can be made. He said the bid was a natural consequence of the government's previous statements that it had the ambition to become the biggest forest owner. "It shows how important the government thinks forests are," he said.