Shares in engineering group Babcock have soared by nearly 17% on news that it could be takeover target for defence firms BAE Systems and VT Group.
All the UK's dockyards could come under one umbrella
Such a deal could reshape Britain's shipbuilding industry by uniting the nation's shipyards.
BAE and VT said that they were in "exploratory" talks over "a potential joint acquisition of Babcock", although no bid has yet been tabled.
The Ministry of Defence (MoD) has pushed for consolidation in the sector.
At close shares in Babcock were up 45.5p, or 16.85%, to 315.5p, while shares in VT Group were up 5.4% and BAE Systems rose 0.7%.
BAE Systems owns shipyards in Glasgow and Barrow, while VT Group owns the Portsmouth yards.
Babcock, meanwhile, has sites in Scotland, including Rosyth and Faslane, where the Royal Navy's sends its nuclear submarines for maintenance.
BAE and VT have already teamed up on various MoD contracts, including work on six Royal Navy Type 45 Destroyers at Portsmouth which are due to be completed in Glasgow by BAE.
At the same time, BAE, VT and Babcock have all been involved in a £3.5bn programme to make two new aircraft carriers for the MoD, making a merger of the three a logical step forward as far as the ministry is concerned.
"The logic behind such a bid would allow rationalisation of the UK warship building industry to progress," said analyst Guy Hewett at Investec Securities.
However, VT Group said today that talks were at "a very preliminary stage" and BAE stressed that there was "no certainty that any offer will be made".
Babcock said that "no approach has been received".