William Hill in £4.5bn merger talks
William Hill is in talks to merge with the owner of poker websites Full Tilt and PokerStars in a deal worth about £4.5bn.
The FTSE 250 betting company confirmed it was in discussions with Canada's Amaya about a "potential all-share merger of equals".
The move is the latest example of consolidation in the gaming industry.
It follows 888 Holdings and Rank abandoning a proposed £3bn tie-up with William Hill in August.
William Hill said its board had been examining ways to diversify by expanding its digital and international businesses, while Amaya had also been reviewing its options.
"The potential merger would be consistent with the strategic objectives of both William Hill and Amaya and would create a clear international leader across online sports betting, poker and casino," William Hill said.
A merger of the two companies could produce annual savings of up to £100m.
Talks are continuing and no agreement may be reached, as private equity firms are also said to be eyeing Amaya.
It says PokerStars is the world's biggest online poker website.
Amaya is listed on both the Toronto stock exchange and Nasdaq. Its shares have risen by a third this year, making the company worth $2.4bn (£1.9bn).
Shares in William Hill, however, are down by a quarter since January, leaving it valued at just under £2.6bn.
In August William Hill reported a 16% fall in operating profits to £131.1m. Interim chief executive, Philip Bowcock, said the first half of the year had been challenging as the company battled problems with its online business.
Other recent mergers in the gambling industry include a £2.3bn tie-up between Ladbrokes and Coral in July, while GVC Holdings has taken over Bwin.party.
Paddy Power and Betfair completed their merger in February and joined the FTSE 100, but shares have fallen almost 20% since then.
A combined William Hill/Amaya would be large enough to also enter the list of the biggest companies listed in London.