Broadspectrum could turn the tables on hostile Spanish suitor Ferrovial if it receives a counter-bid from a suitor closer to home.
Street Talk understands ASX-listed contractor Downer EDI has sought counsel over the possibility of making a rival bid for Broadspectrum (formerly known as Transfield Services.)
With Ferrovial being advised by Downer's usual advisor, UBS, the engineering contractor has been forced to look elsewhere for advice.
Ferrovial is offering $1.35 in cash for Broadspectrum, valuing the services group at around $715 million. It has started engaging with the Broadspectrum's board, but will proceed with a hostile bid direct to shareholders if a friendly deal can't be agreed.
Downer's chief executive, Grant Fenn, has been open about his desire to make more acquisitions, with the company picking up Tenix for $300 million in late 2014.
Downer also has the firepower to do more deals. With net debt of only $179 million, its gearing is running around 8 per cent. The company had liquidity of $982 million at the end of June, consisting of $372 million in cash and some $610 million in undrawn committed debt facilities.
But it is going up against a behemoth in Ferrovial: Downer's $1.4 billion market capitalisation pales in comparison to the Madrid-based infrastructure group, which has a market capitalisation of 15.4 billion euros (A$23.3 billion.)
So the chances of Downer making a formal offer are slim. But the engineering group hasn't ruled it out.
BRS Price at posting:
$1.33 Sentiment: Hold Disclosure: Held