Contractor Arabtec is weighing up a merger with the construction arm of Abu Dhabi-based Trojan Holding.
The two firms "have commenced a review of the possibility of combining their construction businesses," Arabtec said in a statement on Tuesday to the Dubai Financial Market, where its shares trade.
"In the event an agreement is reached between ... following the technical, financial and legal reviews, it is intended that a contract will be signed for this purpose detailing the terms and applicable procedure for such combination which made lead to a merger between the two companies", Arabtec said.
The names of any advisers working on a potential merger will be disclosed once they are appointed.
Trojan Holding contains a number of construction companies, including Trojan General Contracting and National Projects & Construction. It also owns subsidiaries that carry out mechanical electrical and plumbing contracting, cladding, steel and aluminium fabrication and pre-cast and ready mix concrete. It is part of the Royal Group.
Trojan General Contracting has picked up large contracts for developers such as Aldar Properties, Emaar Properties and Nakheel, for whom it is currently building the Palm Tower Hotel and Residences on Dubai's Palm Jumeirah.
In July, the company won a Dh2 billion contract from Aldar to expand the Al Falah housing community on behalf of the Abu Dhabi government. The work involves adding a further 899 villas and a mosque for up to 2,000 worshippers, adding to the 4,898 villas that have already been built within the community.
The company is also carrying out work in Chechnya, Rabat and in the Kurdistan region of Iraq.
Last week Arabtec and Trojan Holding said they were "willing to explore the possibility of entering into a cooperation agreement with a view to collaborate in the construction sector".
Arabtec is the UAE's largest listed contracting company, with a workforce of more than 45,000. Last month, the company reported a 49 per cent decline in profit to shareholders for the first half of the year, to Dh57.8 million as revenue fell 12 per cent to Dh4.2bn. The company said that its backlog remained "strong" at Dh14bn, despite a fall in new contract awards during the reporting period.
Arabtec's shares leapt 10 per cent following the announcement of potential merger talks, and were trading at Dh1.76 by 12.30PM on Tuesday.
