Online gaming firm PartyGaming is in talks with Austrian rival Bwin over a potential deal that could create a £2 billion internet gambling giant, it has been reported.
PartyGaming is expected to be asked by the Takeover Panel to clarify its position before the stock markets open Monday morning, according to The Sunday Times.
The firm, led by chief executive Jim Ryan, is thought to be keen to boost its sports betting offer, an area of strength for Bwin.
Meanwhile, there has reportedly been growing speculation over consolidation in the online gaming industry.
But a source told The Sunday Times discussions were at an early stage and might not lead to a deal.
"Everyone in the industry is talking to everybody else," the source said.
PartyGaming has a market value of more than £1 billion while Bwin, which is listed on the Vienna stock exchange, is thought to be valued at 1.3 billion euros (£1.2 billion).
In August, PartyGaming hailed the performance of its casino operations, which include PartyCasino and FoxyBingo.
This helped offset pressure on its PartyPoker division after strong competition left poker earnings 29% lower.
PartyGaming reported a bottom-line loss of 66.9 million US dollars (£41 million) due to payments associated with a non-prosecution agreement with US authorities.
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