Bookmaker GVC Holdings has offered to buy Ladbrokes Coral for up to $5.2 billion to create a global online and high street betting giant able to take on rivals and cope with a tougher regulatory environment.
Shares in the 230-year-old Ladbrokes jumped 26 percent in early trading, while GVC shares rose 6 percent on confirmation of the long-rumoured offer, which is in cash and shares.
"Whilst this deal was always likely, most had thought GVC would wait until the government's triennial review of fixed odds betting terminals was finished before it would happen".
"The enlarged group would be an online-led globally positioned betting and gaming business that would benefit from a multi-brand, multi-channel strategy applied across some of the strongest brands in the sector".
In addition, the companies have agreed that should the deal go through, Kenneth Alexander, now chief executive of GVC, would take on the same role at the enlarged group.
Both companies believe that the group would be geographically diversified with a large portfolio of businesses across both regulated and developing markets.
Last month, GVC announced the sale of its Turkish subsidiary, removing a potential obstacle to a deal with Ladbrokes, which had raised this as one sticking point during August's talks.
Ladbrokes completed its £2.3bn merger with Coral in November past year, but it is understood GVC first approached Ladbrokes over a tie-up when it was finalising the deal.
The transaction will also enhance the enlarged group's position in a number of the world's largest regulated iGaming markets including the UK, Italy and Australia, significantly increasing GVC's current share of revenues from locally regulated or taxed markets to more than 90 per cent.
GVC said it expected "material synergies" from a merger with Ladbrokes, which it would lay out in any forthcoming firm offer.
This is the third time GVC, owner of the Bwin, Sportingbet and Foxy Bingo brands, has approached Ladbrokes about a takeover.