Midland pub groups Mitchells & Butlers and Punch Taverns have distanced themselves from rumours they will link up in a £5 billion deal.
Punch Taverns, based in Burton, was reported to have approached top shareholders of All Bar One and Harvester owner M&B over the deal to create a giant with 11,000 pubs.
Punch is said to have engaged Morgan Stanley to begin talks with leading investors in both companies such as insurance giant Axa and London-based hedge fund Marshall Wace over the possible deal. The approach could value Birmingham-based M&B at around £3.2 billion, or 800p a share. But a spokesman for M&B played down the reports.
He said: "There are no ongoing merger talks and there has been no approach from Punch."
Punch also repeated the denials.
It said: "Punch notes the current speculation regarding Punch and Mitchells & Butlers. Punch confirms that it is not in discussions with Mitchells & Butlers or any Mitchells & Butlers shareholder regarding any offer or merger."
Although M&B earlier this year expressed an interest in Punch's Spirit acquisition, a merger would be complicated by the two companies' different business models.
While M&B owns and manages more of its own pubs, Punch relies on a tenanted model.
M&B is also more food-led, while Punch's profits depend more on drinks sales.
The merger proposal comes after the summer's turmoil in financial markets delayed M&B's £4.5 billion plans to put 1,300 of its pubs into a tax-efficient property venture with major shareholder Robert Tchenguiz.
Some M&B investors are said to be keen to revive this deal as financial markets recover, although others are now understood to be looking favourably on a tie-up with Punch in a bid to create returns for shareholders.
Punch, which is based in Burton-on-Trent, has more than 8,400 pubs. The majority - over 7,500 - are leased to individuals who run them as their own businesses.