Global food giant Mondelez International has approached Burton's Biscuits to buy its Cadbury licence.
Burton's, which also produces Wagon Wheels and Maryland cookies, makes biscuits including Cadbury Fingers under licence from Cadbury UK.
The proposal was valued at around £200m, Sky News first reported, though sources said the talks were still at an early stage and may not result in a deal.
Mondelez bought Cadbury in an £11.5bn deal from Kraft Foods in 2010. If it does strike a deal with the chocolate maker, it will unite its confectionery and biscuit arms.
Last month, Reese's Peanut Butter Cups maker Hershey's turned down a takeover bid from Mondelez after its board unanimously rejected the offer, which was for an undisclosed value.
Burton's is majority-owned by Canadian retirement fund the Ontario Teachers' Pension plan.
Mondelez International and Burton’s Biscuits declined to comment.