Sportswear retailer JD Sports Fashion has approached its struggling rival JJB Sports about a possible takeover offer, the two companies said.
JD Sports said it was in "early stage" discussions with JJB's board, while JJB Sports described the talks as "highly preliminary."
Both companies said there was no certainty an offer would be made by JD Sports.
Shares in JD Sports, which trades as JD Sports, Bank, Scotts and Chausport from over 500 stores, closed yesterday at 847.5 pence, valuing the business at about £406m.
Shares in smaller rival JJB Sports, which trades from about 250 stores, closed Tuesday at 4.6 pence, valuing the business at about £29m.
In December investors including Bill Gates, the United States' richest man, backed a £31.5m fundraising to keep JJB Sports alive after dire trading in the run-up to Christmas.
In contrast JD Sports traded well over the festive period.
City A.M. Reporter