Shares in internet gaming firm Sportingbet have jumped 15% after it said it had received a "very preliminary" approach to be taken over.
Austrian online gambling company Bwin Interactive confirmed reports that it was the potential suitor.
The industry is looking to consolidate and cut costs since a US ruling last year which effectively outlawed internet gaming in the US.
The move led Sportingbet to sell its entire US operations for just $1.
Sportingbet shares closed up 8 pence, or 15.1%, at 59p.
The Daily Mail newspaper reported that Bwin was prepared to offer 65 pence per share.
In a statement, Bwin said that its approach "may or may not" lead to an offer.
US costs
Last year, hundreds of millions of pounds were knocked off the market value of Sportingbet after US authorities arrested the company's chairman, Peter Dicks.
Mr Dicks was subsequently released, but Sportingbet, along with much of the rest of the gaming sector, was hit by new US legislation which made it a federal offence for firms to accept or handle money obtained from online gaming in the US.
Last week, Sportingbet reported a 54% increase in operating profits to �2m for the three months to 31 January. However, in the previous quarter the company had taken a �252m charge for the disposal of its US business.
Sportingbet is one of the biggest online gaming firms. Another, Gibraltar-based 888 Holdings, is a long-term takeover target of Ladbrokes.
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