Engineering services giant Babcock International is in talks over a £1.5bn tie up with the world's biggest helicopter operator.
Babcock, which is involved in the construction of Britain's two new aircraft carriers, confirmed exclusive discussions to form a "joint venture" with Avincis, which provides air services from search and rescue to oil rig passenger transport across the world.
It is thought FTSE 100 Index-listed Babcock is looking to buy a significant stake in Avincis, while The Sunday Times reported plans for a takeover that would see it pay £1bn and take on £500m of debt.
Part-ownership of Avincis would give the FTSE 100 contractor, which began an international expansion drive three years ago, access to potentially lucrative defence contracting markets, particularly in Spain and Italy.
"Babcock International Group PLC confirms that it is in exclusive discussions regarding the establishment of a joint venture with respect to Avincis," the company said in a statement.
"However, there can be no certainty that these discussions will lead to any transaction or any certainty as to the terms upon which any such transaction might proceed."
Avincis is headquartered in London, but is owned by US private equity giant Kohlberg Kravis Roberts and Italian buyout firm Investindustrial, which also owns Aston Martin.
It owns Bond Aviation Group, which has 23 sites across the UK, including an Aberdeen-based search and rescue service for corporates and air ambulance and police aviation division. The group has fleets in 10 countries and nearly 3,000 employees.
Babcock has a 27,000-strong workforce and runs the Devonport and Rosyth dockyards.
It earns just over half its sales from the Ministry of Defence, but also maintains power grids and railway stations, as well as providing services to the nuclear power sector.
The group posted a 17 per cent hike in half-year pre-tax profits to £141.7m earlier this month, thanks to a 9 per cent rise in revenues.
Babcock is part of a BAE Systems-led consortium working on the UK's new 65,000 tonne aircraft carriers and pieces together huge parts of the vessels at its Rosyth shipyard in Scotland.