The move comes as the state-owned French nuclear power station supplier, Framatome, is on the brink of acquiring the nuclear services division of Siemens of Germany.
The acquisition of ABB's nuclear arm would strengthen BNFL's position as the world's leading nuclear reprocessing and fuel services company ahead of its pounds 1.5bn stock market flotation.
BNFL bought the nuclear business of Westinghouse of the United States last year for $1.2bn and has been on the lookout for further deals since to consolidate its nuclear-fuel manufacturing business.
John Taylor, the chief executive of BNFL, is understood to have visited ABB's headquarters in Zurich 10 days ago to discuss the deal and sign an exclusive negotiating agreement. The deal is codenamed Diamond.
Framatome had also been interested in buying the ABB business with the result that BNFL has been forced to raise its price.
The precise value of the deal is not known, but ABB's nuclear business has sales of around $400m a year.
The takeover will be structured in such as way that BNFL buys ABB's operations in Europe while Westinghouse buys its activities in the United States where ABB has a nuclear fuel fabrication facility in Connecticut.
The deal could yet face anti-trust objections in the United States, where it will lead to a reduction in competition in nuclear-fuel manufacturing and clean-up.
The expected Framatome-Siemens deal will lead to a further consolidation of the industry.
Following the Westinghouse acquisition, a third of BNFL's pounds 2bn-a-year turnover comes from the manufacture of fuel and the servicing of nuclear reactors around the world. The purchase of ABB's nuclear division would raise this to nearer a half.
BNFL's strategy is to diversify away from recyclingspent nuclear fuel at its Sellafield plant in Cumbria and to build a bigger international presence.
One of the government-imposed targets BNFL has to meet in order for the partial privatisation to proceed is to increase profits from its US business to 15 per cent of the group's total.
Last year BNFL made a pre-tax profit of pounds 228m - a 42 per cent increase on the pounds 160m recorded in 1997/98.
A spokesman for BNFL said the company could not comment on market speculation.Reuse content