William Hill and Paddy Power Betfair have both had talks with Australian gambling firm CrownBet over a possible deal as higher taxes and tougher regulation drive consolidation in the market there.
Hills issued a short statement confirming the talks on Friday, while it is understood there has been contact between Paddy Power Betfair – whose Sportsbet brand is one of the biggest players in Australia – and CrownBet.
Hills' statement said: "Following media speculation William Hill confirms it is in very preliminary discussions with CrownBet, the 62 per cent-owned online wagering business of Crown Resorts, regarding a possible combination of William Hill Australia, a wholly owned subsidiary of William Hill, and CrownBet.
"There is no certainty that these preliminary discussions will lead to any transaction."
Crown Resorts is one of Australia's largest casino and entertainment groups. James Packer, son of media mogul Kerry Packer, is the major shareholder in the group.
In a trading update on Monday Hills described business in Australia as "challenging", with amounts wagered falling by five per cent.
The Australian government has introduced a ban on credit betting while individual states have either introduced, or are looking to bring in, a point of consumption tax on online gambling companies based in Northern Territory.
Australian giants Tabcorp and Tatts Group are in the midst of their own Aus$11 billion (£6.29bn/€7.02bn) merger and further deal-making is expected in the market.
Gavin Kelleher of stockbrokers Goodbody said in an analyst's note on Friday: "What the Australian news flow within the last 24 hours confirms is that tax increases are likely to continue in Australia . . . and this could well drive consolidation in the market."
Hills shares fell 1.7p to 282.1p on Friday, while Paddy Power shares rose £2.75 to £88.10.