Struggling retailer JJB Sports has confirmed it was in takeover talks with high street rival JD Sports Fashion.
Reports have suggested that an approach about a deal was made by JD several weeks ago.
In a statement, JJB said: “Further to the press speculation this evening, JJB Sports plc confirms that it is in initial discussions with JD Sports Fashion plc in relation to a potential offer.
“The highly preliminary nature of these discussions is such that there can be no certainty that any offer will be made or as to the terms of any offer.”
A merger of the two companies would create one of the biggest high street chains in Britain.
But Wigan-based retailer JJB, which operates nearly 250 stores and employs 6,300 staff, was recently thrown into a battle for survival after it revealed that a major promotional drive had failed to deliver results.
The company reported that like-for-like sales decreased by 15.7% between November 8 and December 19.
It announced in December it was to turn to investors, including the Bill & Melinda Gates Foundation Trust, to raise more than £30 million in a rights issue.
The group raised £100 million from investors just over a year ago.
Last week its troubles increased when it was fined £455,000 by the Financial Services Authority for failing to disclose it had bought two smaller rivals for £16 million more than it told investors.