The owners of Italian Serie A club Udinese have agreed a takeover of Watford, the Championship club said in a statement.
Italian businessman Giampaolo Pozzo has owned Udinese since 1986 and his family bought Spanish team Granada three years ago.
"Representatives from the (Pozzo) family have been in discussions with Watford Football Club and both parties have agreed initial terms," Watford said.
Based just north of London, Watford were in the Premier League in 2006-07 but were relegated after just one season and have been in the Championship (second division) since.
Watford enjoyed their best years in the early 1980s when singer-songwriter Elton John was chairman. The Hornets finished runners-up in the old first division behind Liverpool in 1983 and were beaten FA Cup finalists a year later.