Merger talks between British supermarket chains Sainsbury's and Asda are at an "advanced" stage, Sainsbury's has confirmed.
The two brands are expected to be retained should a merger go ahead.
Sainsbury's and Asda - a subsidiary of Walmart - are the second and third largest supermarkets in the UK.
The combined group would comprise 2,800 stores and would represent 31.4% of the UK grocery market - slightly more than that of market leader Tesco.
J Sainsbury plc released the following statement:
"Sainsbury's confirms that it and Walmart Inc. are in advanced discussions regarding a combination of the Sainsbury's and Asda businesses."
The deal would be worth £10bn (USD 13.8 billion). A further announcement is expected on Monday morning.
George MacDonald, editor of Retail Week, said the grocery industry had been shaken up by low-cost supermarkets such as Aldi and Lidl.
"So maybe this type of mega deal will get the go ahead by the Competition and Markets Authority."