Punch Taverns has bid £2.7b for Spirit Group in a deal that would create the UK's largest pub company with more than 9,500 sites.
The long-rumoured deal would reunify managed company Spirit with its one time owner Punch.
Punch said Spirit's mainly community pubs would be better run under its successful leased and tenanted model.
If successful, Punch intends to convert 750 of Spirit's 1,832 pubs to this format within two years, sell 82 for alternative use, and carry out a review of the remaining portfolio.
Although they have declined to comment on the speculation, it has been widely reported that Mitchells & Butlers could be a likely future home for some of the bigger sites in the deal, as their size may favour the management model.
In a separate move, Punch sold 203 pubs to Admiral Taverns for £40m.
Punch chief executive Giles Thorley said: "The proposed acquisition of Spirit will further increase the scale and quality of our estate."
The deal is structured with £1.25b of debt and the assumption of a £1.25b Spirit debenture, as well as £275m of convertible bonds and £75m of up to new ordinary shares.
Karen Jones, chief executive of Spirit Group, said: "It has been an eventful and enjoyable journey and I look forward to seeing our pubs and our people move forward as part of Punch Taverns."
By Chris Druce
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