The Royal Melbourne Yacht Squadron wants to lead a $150 million challenge to win back the America's Cup in 2007.

A Sydney syndicate of business high-flyers is behind the plan, with Royal Melbourne confirming it is in talks to be the campaign flagbearer.

Royal Melbourne chief commodore Alan Saunders said yesterday a successful challenge against the Swiss titleholders would mean the 2011 America's Cup would likely be held outside Port Phillip Bay. Mr Saunders confirmed the squadron was negotiating with the Sydney group to run the campaign from his St Kilda pier headquarters.

"We are in discussions with a syndicate to launch an America's Cup challenge. We are extremely optimistic about the outcome," he said. "We believe that it will definitely be in Melbourne. We believe that we are the preferred site".

"We see it as a very good thing for the state of Victoria. And extremely positive. And I'm really excited about the prospect."

The State Government and Victorian Major Events Company was told of the proposed bid yesterday. Government sources doubted any taxpayer money would go into the bid.

Kristine Condell, chief operating officer for the as yet unnamed syndicate, said it was about four days away from formally announcing the bid. Its budget would be $150 million and $10 million had already been pledged by a sponsor. The bulk of the bid's money would come from corporate sponsors, including overseas sources.

Ms Condell said the squadron would not be required to contribute money but provide professional advice and the location for trials.

"The reason we wanted the burgee (flag) of the Royal Melbourne Squadron is that the squadron happens to be a sailing squadron as opposed to a quasi-social squadron," she said. "We felt that we would have a better quality of support in terms of sailing advice.

"It's a sailors' club. That was why I approached Alan (Saunders) and they embraced it straight away."

She said three people headed the syndicate, including herself and John O'Neill, a Sydney businessman who until recently was principal dealer at Heartland Holden in Parramatta.

Mr O'Neill said the syndicate had had talks with several states and Melbourne had shown significant interest. "We haven't got a fixed view on trials but certainly there would be a heavy sailing involvement in Melbourne," he said.

Ms Condell, a former corporate headhunter and dot-com entrepreneur, claimed the proposed bid was "a long way down the track" and refused to name major syndicate backers.

"Eventually it would be 108 people or something. Quite a substantial amount of people," she said. Major Events chief Steve Vizard said he would need a properly outlined proposal before making any assessment.

"We're in early days", Mr Saunders said. "We have to raise the money, get the support from government and issue the challenge. The challenge has to be in by December."