Takeover target Transfield Services fears Spanish predator Ferrovial could become an Australian market rival if acquisition talks fail, and is demanding it sign a confidentiality pact.
Ferrovial is reportedly considering ditching its $1 billion bid for the Australian maintenance and infrastructure firm, two weeks after Transfield rejected its $1.95-a-share offer.
The sticking point appears to be Transfield's wish for the Spanish engineering giant to sign a confidentiality agreement while it examines the takeover target's books.
Transfield chief executive Graeme Hunt said it was only fair that Ferrovial signed a three-month standstill agreement not to trade shares in Transfield as it viewed detailed, confidential information about its business.
"They have a desire to operate in this market," he told reporters after the company's annual general meeting on Wednesday.
"We could be competing with this company if this thing falls over.
"It's only prudent, both from the perspective of protecting the value of the company, that we don't disclose that information without the proper terms and restraints behind it."
It is understood that Ferrovial is willing to sign a confidentiality agreement, barring it from buying shares as it conducted due diligence.
But it objects to a clause whereby Transfield's directors, instead of shareholders, must approve of their offer.
Mr Hunt said Transfield's confidentiality proposal was standard.
"We're not doing anything different which is not typical in this kind of environment," he said.
"We will give them enough information, we believe, to give them an understanding as to why we think this company's worth more than what they've got on the table."
Some shareholders questioned Transfield's bosses at the meeting about what the board would consider to be an acceptable takeover offer from Ferrovial.
But chairman Diane Smith-Gander refused to give them any hints.
She later told reporters the "board's not feeling any pressure" regarding the potential takeover.
Meanwhile, Transfield lifted its guidance for full year underlying earnings to between $260 million and $280 million.
Transfield in August forecast earnings before interest, tax, depreciation and amortisation of between $240 million and $260 million.
Its underlying earnings for 2013/14 were $217 million.
Ms Smith-Gander hinted to shareholders that Transfield may soon start paying dividends once more, now that its debt was falling.