Shares in Trinity Mirror jumped nearly 8 per cent yesterday after the media group admitted it could be joint owner of a new regional newspaper business alongside its rival Daily Mail and General Trust.
DMGT yesterday confirmed it is looking to sell its estimated £100m stake in regional newspapers business Northcliffe Media.
Meanwhile, Trinity said that it "is in discussions towards taking a minority interest in a new company comprising the assets of Northcliffe Media and Iliffe News & Media, a division of Yattendon Group".
It is believed that it would not be a straight cash deal, with DMGT also accepting an interest in the new group, which is set to be called Local World.
The new venture could see a lead role for former Mirror chief David Montgomery who last year set up a London-registered company called Local World.
The two groups were cagey about progress on the deal yesterday. DMGT confirmed that "No deal or transaction has been agreed" for Northcliffe, which comprises 84 newspapers across the country as well as 26 local news sites.
Trinity, which owns more than 130 regional daily and weekly newspapers, confirmed no offer has been made at this stage. Northcliffe's key titles include The Bristol Post and Derby Telegraph. Trinity's regional papers include Manchester Evening News and Newcastle Journal.
Yattendon is a privately owned media group that used to run the Birmingham Post and Coventry Telegraph, now owned by Trinity. It publishes 28 daily and weekly papers.
It is believed Trinity will keep its titles out of the new business, but that would not ease fears of further consolidation and closures.
Shares in Trinity rose 4p to 55.25p, while DMGT fell 0.75p to 472p.