Midlands health food group Julian Graves may be merged with Whittard of Chelsea if a takeover bid for the tea and coffee business succeeds.
Retail owner Baugur has emerged as the suitor behind an approach for Whittard.
It is understood that the Icelandic operation is planning a £21 million bid which, if successful, would see the quintessentially British firm merged with the health food group. Bauger bought Kingswinford-based Julian Graves for £14 million last year and it is thought it would seek to merge it with Whittard as it continues a trend of creating synergies through buyouts.
Julian Graves - which began life as a Cotswold market stall - is the UK's largest independent retailer of specialist snacks and ingredients, with 220 outlets selling foods such as cherries, walnuts and ground almonds.
The company employs nearly 900 people, 80 per cent working in its shops and the rest employed at its headquarters on Kingswinford's Pensnett Estate.
Whittard was the subject of much interest in the summer but potential takeover parties deserted the firm amid poor trading figures.
However it has confirmed it had received a fresh approach but refused to identify the bidder.
Shares in Whittard rose
12.5p to 87p on the news - but closed down 1p at 86p. Any bid from Baugur is likely to be around 90p a share - well short of its 122.5p summer level on the back of earlier takeover speculation and its 220p high of July last year.
A number of reports linked Baugur to the approach yesterday , although the company declined to comment.
Whittard was founded in 1866 when it opened among newspaper offices in Fleet Street and now has 127 shops.
Profits were hit by tough trading conditions over the last year and the July bombings on London, where it has 14 stores. Last month, Baugur acquired jeweller Mappin & Webb for £21 million and added the chain to Goldsmiths, which it bought 18 months earlier.
It has also seen its presence on the high street expand with the purchase of Karen Miller and Oasis, which it grouped together with Coast and Whistles to float on the stock market under the name Mosaic with a value of £300 million.