Bord Gβis has failed to secure a £100 million sterling (€158 million) gas pipeline business it wanted to acquire in Britain.

The sale of the business controlled by the French group Total Fina Elf to a venture capital group is a setback for the State-owned company, which wants to expand its British operation.

It was shortlisted in May as a potential buyer of Elf Connect, put on the market late last year.

Bord Gβis is thought to have been prepared to spend up to £100 sterling on the business, which links 120,000 homes to the gas network.

Total Fina Elf is understood to have reached agreement last week to sell the business to Star Capital, a venture capital group. The purchase price is not known.

Managers at Elf Connect were said to be considering a buy-out, although a source said they had not taken a stake at this stage. Total Fina Elf is thought to have been in contact with Bord Gβis last week, before it reached agreement with Star Capital.

People familiar with the discussions, however, have said Bord Gβis was "not in pole position" when shortlisted.

The company is keen to move into Britain by acquisition or investment because deregulation will erode its Irish market. It established a wholly-owned subsidiary last year.

That firm, Utility Grid Installations, has been awarded a public gas transporter licence from the OFGEM, which regulates the gas and electricity sectors in Britain.

Elf Connect was seen as a good complement to the business. It owns, builds and operates gas pipes, mainly into new housing developments.

The company does not sell gas to customers. An infrastructure operator, it is one of Britain's largest public gas transporters with a network said to be expanding by 30,000-40,000 customers per annum.

A £100 million investment was likely to have required sanction by the Government, which is Bord Gβis's sole shareholder.

Although significant, such an investment would have been much smaller than the €1.7 billion (£1.34 billion) the ESB was prepared to spend on the proposed acquisition of eight electricity supply companies in Poland.

A Cabinet sub-committee blocked the ESB's binding bid for that business in June, a decision seen as a severe blow to the company's management.

Senior figures in Bord Gβis are said to regard the development of a British business as important to its future strategy.

The company's reserved market was reduced earlier this year when the Government sanctioned its construction of a €279 million inter-connector, parallel to its existing link between Dublin and Scotland.

As well as constructing a new pipeline linking Dublin, Galway, Limerick and Cork, the company also wants to develop an electricity generation business in the Republic.