Mobile phone retailer Carphone Warehouse and electricals specialist Dixons have confirmed they are in “preliminary discussions” to merge.
There is no certainty that a transaction will be completed and no decision has been reached regarding a merger structure.
The pair have until 5pm on 24 March 2014 to announce a firm intention to make an offer but that deadline can be extended by the regulation authorities.
Carphone and Dixons have a market cap of £1.8bn each while revenue at Carphone was £3.3bn and EBITDA was £200m in 2013. Dixons revenue was £7.5bn and EBITDA was £326m in 2013.
Under the leadership of Chief Executive John Browett, Dixons saw off competition from Best Buy, who began a relationship with Carphone in 2008, but closed all 11 UK Best Buy stores in November 2011 as the US firm exited the UK.
Chief Executive Sebastian James is expected to lead one of the high-streets biggest chains if talks lead to a merger with Chairman Sir Charles Dunstone expected to become chairman.
Dixons shares were up 6.98 per cent and Carphone shares jumped 5.2 per cent following the news.
The electrics market is set to grow 3.3 per cent in 2014 according to Verdict.