Lamprell, a UK oilfield services company with operations in the Middle East, is in preliminary talks to buy Maritime Industrial Services (MIS), a rival based in the UAE.
In a deal that would result in MIS going private, the company is conducting "intensive due diligence" as it studies Lamprell's offer.
"Lamprell confirms that it has entered into a letter of understanding with MIS in respect of a potential offer to purchase 100 per cent of the shares in MIS at a price of 38 [Norwegian kroner] per share, but discussions with MIS are at a very preliminary stage," the company said. MIS is a UAE company but is listed on the Oslo stock exchange in Norway.
"There can be no certainty that an offer will be made. It is anticipated that any offer that is made would be financed from an issue of equity to Lamprell's shareholders and new debt facilities."
MIS, based in Dubai, confirmed it was involved in talks but did not reveal any further information.
The company's stock jumped 5.3 per cent on the Oslo exchange to 33.60 kroner a share in trading yesterday after the talks were announced, making Lamprell's offer a 13 per cent premium. The deal would value MIS at about 1.8 billion kroner (Dh1.2bn).
Last month, Nigel McCue, the chief executive of Lamprell, said the company would look for "businesses which are directly related and also offer complementary businesses … services in the downstream sector, engineering services, which would more complement us on the downstream as well as the upstream side of the business".
Its US$210 million (Dh771.3m) cash holdings and lack of debt made it a "relatively substantial" acquisition, Mr McCue said.
Peter Bassett, an oil and gas analyst at Westhouse Securities, said Lamprell could gain great benefits from Middle East acquisitions.
"The Middle East is very much within their orbit and they'll do well there," Mr Bassett said. "We're happy to see they're [operating] within roughly the same geography."
MIS's shares, 12.96 per cent of which are publicly traded, are held by a large number of local buyout firms including Gulf Capital, Amwal AlKhaleej, as well as the GCC Energy Fund, based in Dubai, according to Zawya.