Engineering giant Amec is reportedly looking to merge with rival Foster Wheeler, but is not currently in talks with the company.
A deal between the pair would create a £5bn energy services group with a big presence in the Scottish oil and gas industry, though a source close to the matter said Foster Wheeler is only one among a number of potential acquisition targets.
Amec shares were down more than 3 per cent in morning trade after a report in the Times newspaper said the firm was interested in Foster Wheeler, which has a market value of $2.8bn (£1.7bn).
Amec, which has a market capitalisation of $5.6 billion, has repeatedly said it is on the look out for acquisitions in the past few months and has said it will consider returning cash to shareholders this quarter if no deal is forthcoming.
The firm walked away from a £700 million takeover approach for Kentz, which works on oil and gas services projects across the globe back in August.
Kentz and Foster Wheeler both have strong construction divisions and are active in liquefied natural gas (LNG) projects. Foster Wheeler's services cover engineering, procurement and the supply of power equipment. It has several bases in the UK, including in Aberdeen and Reading.
Amec employs about 29,000 staff in 40 countries. The two companies already work together after recently securing consultancy contracts in Kuwait for the building of a new refinery.
A spokesman for Amec said the company did not comment on market rumours and Foster Wheeler did not return calls seeking comment.