Sources closed to the company confirmed yesterday that the two parties were in "top-level" talks on the future of Bovis. They said Hochtief was the front-runner in the race for the pounds 1.8bn-turnover business, but warned that a deal was not imminent and could take up to two months to be completed.
The sources said that there were no other groups in the running for Bovis, but admitted that the company had had talks in the past with the rival construction group John Laing about a possible joint venture.
Last week Sir Martin Laing, chairman of John Laing, said there were "no talks whatsoever" between the two companies at the moment. Some industry sources have speculated that Bovis could strike a joint venture deal with the project manager WS Atkins, but both companies have denied this.
Last year, Bovis Construction had a turnover of pounds 1.8bn and posted a 10.1 per cent increase in operating profits to pounds 16.3m. In the first half of the current year Bovis made a profit of pounds 9.6m. Unlike traditional contractors, Bovis specialises in construction management - co-ordinating the work of a number of contractors on building projects.
Sir Frank Lampl, Bovis chairman, is keen to strike a deal with a partner in order to increase the range of services Bovis can offer. He wants to add specific engineering skills which could be used to win lucrative contracts among petrochemicals and pharmaceuticals customers.
A tie-up with Hochtief, one of Germany's leading construction groups, would give Bovis a foothold in the German market and the prospect of a presence in the US.
For P&O, the sale of Bovis would complete its withdrawal from non-transport activities started last year with the pounds 226m flotation of the house-builder Bovis Homes.