Tui Travel has entered into merger talks with its German parent group in a move that could generate about €100m (£83m) in savings across the enlarged company.
Tui AG, which owns 56.4 per cent of the London-listed group, proposed the nil-premium, all-share merger, it emerged today.
Reports suggested that Tui AG's largest shareholders, the Russian tycoon Alexey Mordashov and the Norwegian shipping magnate John Fredriksen, were behind the tie-up. They own a combined 40 per cent of the Hanover-based company but have lost money on their investments in recent years.
Under Takeover Panel rules, Tui AG has until 13 February to either make a firm offer for Tui Travel or walk away.
Tui Travel was formed in 2007 following the merger of Tui AG's travel business with British rival First Choice.
Shares in Tui jumped nearly 4 per cent to 292.5p today.
The company said discussions were at a "very early stage".
Tui AG specialises in hotels and luxury cruise operations and holds a stake in the container shipping group Hapag-Lloyd.
Any deal would end months of speculation about both groups.
Market sources said other options to combine the groups have recently been explored.