Construction group Balfour Beatty is considering a move to gatecrash rival Carillion's £290 million takeover of smaller firm Mowlem.
The UK's leading private finance initiative (PFI) company told investors in a brief statement that it was thinking about making an approach.
Plans for a tie-up between Mowlem and Carillion were announced last week in a move set to create one of the UK's largest support services and construction firms with a combined turnover of around £4.1 billion.
Mowlem ' s contracts include the upgrade of the Ministry of Defence headquarters, while it has worked on the landmark Spinnaker Tower project at Gunwharf Quays in Portsmouth.
Mowlem's Building division recently landed £18 million of contracts as part of the NHS Local Improvement Finance Trust (LIFT) initiative to design and build local health centres at Dudley in the West Midlands and Sheffield in South Yorkshire.
In Dudley, two health centres will be built for the Dudley South Primary Care Trust, including a learning disabilities services centre and a health and social care site in Stourbridge.
A further £ 10 million scheme is the extension and refurbishment by Mowlem Building of one of Coventry's largest multi-storey car parks.
According to one report Carillion's recommended offer for Mowlem had taken Balfour by surprise as it was also looking at the company's books and had indicated a possible offer price to the group.
Balfour is still said to be looking through the accounts of Mowlem, which is battling to revive its performance with a shake-up under the leadership of chief executive Simon Vivian, who joined in December last year.
This has included the restructuring of its construction services operation, which resulted in more than 200 redundancies and split the arm into three divisions - Mowlem Building, Mowlem Infrastructure and Mowlem Engineering.
Balfour Beatty, which has a stock market value of £1.5 billion, is expected to pay a big premium to the £290 million offered by Carillion. It is thought the price could reach £315 million, or 222p a share.
Balfour told the stock market yesterday: "Balfour Beatty confirms that it is considering making an offer for Mowlem. There is no certainty that an offer will be forthcoming."
A spokesman said later: "We'll only make an offer if we think there is real value for Balfour Beatty's shareholders. There is no certainty that a bid will emerge, but we're having a close look and have already got access to Mowlem's data room." Analysts reckon Mowlem would make a good fit for either Carillion or Balfour Beatty and that Mowlem's PFI/PPP portfolio and strong project pipeline is proving too attractive to resist.
Mowlem has reached financial close on ten PFI/PPP schemes - with an equity value of around £51 million --while it is also preferred bidder for three MoD contracts for a potential equity value of £46.5 million.
Carillion has also identified some £15 million of cost savings from its deal and analysts reckon Balfour could extract a similar amount of savings and synergies should it decide to bid.
The bulk of the savings are likely to come through better supply chain management and procurement, although a number of job losses are likely as staff are streamlined.
Last week, Carillion said that 'hundreds' of jobs could go as a result of its takeover.
Balfour declined to comment on the likelihood of job losses, but said there would be savings and synergies to exploit if it should go ahead with an offer.