(Adds detail, background, comment)
AMSTERDAM, March 24 (Reuters) - Shares in Dutch builder Royal BAM hit a 13-month high on Thursday on speculation it was in talks to sell its stake in dredger Van Oord in a deal that could be worth about 250 million euros ($351.7 million).
BAM owns a 21.5 percent stake in Van Oord and has been looking to divest the business to pay down debt. Although it has pushed back the timing of a deal several times due to the recession, the company said in December it was again seeking a buyer.
Speculation of a pending deal drove the company's shares higher on Thursday, although some analysts pointed to the company's valuation to explain the sudden jump in price.
"There is a rumour there is a possible buyer and they can get the amount they want. It would make them debt free," one trader said.
BAM shares were up 8.3 percent at 5.40 euros by 1455 GMT to be the second-top gainer in Amsterdam.
BAM spokesman Arno Pronk reiterated a statement from December, when BAM said it and investment firm Merweoord would jointly seek a potential buyer for BAM's stake.
Tom Muller, analyst at Theodoor Gilissen, said BAM could sell the stake for at least 250 million euros ($352 million), booking more than a 50 million euro book gain.
"It would be good to strengthen the balance sheet in the short-term, but from an earnings perspective, it is less attractive," Muller said.
He said BAM would likely use about half of the proceeds to pay down debt and invest the other half in public-private partnerships to compensate for losing Van Oord's earnings.
BAM booked 30.3 million euros profit from its Van Oord operations last year. Traders pointed to the fact that BAM was relegated from the Amsterdam blue chip index to the midcap index on March 18, causing downward pressure on its shares as funds that only invest in AEX stocks were forced to sell the stock.
The shares hit a low of 4.71 euros on March 15 and Muller said the stock was undervalued compared to peers such as Heijmans, while traders suggested midcap funds have since started buying back into the stock.
Muller added there are signs of a recovery in the late-cyclical construction market with BAM and other firms announcing more and more deals, suggesting the worst of the downturn could be over.
The Dutch government has also decided to invest 4.4 billion euros to tackle motorway congestion between Schiphol Airport, the capital Amsterdam and a hinterland city in the largest project tendered in the Netherlands in the past 10 years.
BAM, like several other construction and engineering companies, has indicated it will tender for the project.
"This project is massive and would provide superb visibility to those companies that prove victorious (in tendering for the project)," KBC Securities analyst Michael Roeg said in a note. (Reporting by Aaron Gray-Block; Editing by David Holmes) ($1=.7109 Euro)