Programmed Maintenance Services has approached fellow labour provider Skilled Group about a merger it says would save $20 million.
However Skilled has dubbed the move opportunistic, given it is still recovering from the 50 per cent plunge in its share price over a fortnight earlier this month.
Programmed made a non-binding merger of equals offer to Skilled Group last week.
Skilled's shareholders would also get a 25 cent a share cash payment on top of an equal 50 per cent stake in a new combined entity.
Skilled's shares had jumped 25.5 cents, or 20.08 per cent, to $1.225 at the close while Programmed was 19 cents, or 7.95 per cent, better at $2.58.
As technical labour hire businesses, both companies have faced similar economic headwinds related to the downturn in the mining sector and falls in commodity prices.
Programmed chief executive Chris Sutherland said last month that structural changes in Australia's economy, including job losses and cost pressures from blue collar customers contributed to a 21 per cent fall in first half profit.
The merger could unlock more than $20 million a year in savings, according to Programmed.
"The industrial logic for the merger to create a market leading staffing, maintenance and facility management business in the competitive markets we face is compelling," Programmed chairman Bruce Brook said.
Skilled said it was reviewing the proposal but suggested it did not reflect appropriate value for shareholders.
"Skilled considers that this approach from Programmed has been opportunistically timed, and is based on a closing share price for Skilled well below medium and longer term volume weighted average prices," it said.
Former Asciano chief financial officer Angus McKay is due to take the reins as chief executive of Skilled on January 20, but Mr Sutherland would lead a merged entity under Programmed's proposal.
Both companies provide a range of maintenance and project services as well as skilled labour, including marine services exposed to the oil and gas sector.
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