Shares of US chocolate maker Hershey rose more than 10 percent following news that Mondelez International, which owns UK-based Cadbury, had made a possible acquisition offer to the company.
The deal could create a snack food giant with total annual sales of around $50bn (£39.2bn).
Reached by BBC News, Mondelez and Hershey declined to comment on the news.
Hershey rejected a $23 billion takeover offer from Mondelez in 2016.
According to Bloomberg, the approach is still at a preliminary stage and it is unclear whether the talks will lead to an agreement.
Any deal would need approval from the Hershey Trust Company, a charitable organization that maintains voting control over the business. He had previously blocked the takeover of the firm.
A merger of the two companies could bring some of the world’s best-known confectionery and snack food brands under the same roof.
Hershey is known for brands such as Hershey’s Kisses and Reese’s Peanut Butter Cups.
In addition to Cadbury, Mondelez’s brands also include Ritz crackers, Oreo biscuits and Toblerone chocolate.
The packaged food industry has faced slowing growth as consumers have been negatively impacted by years of rising prices.
Chocolate companies, in particular, had to pass on the costs of the increase in cocoa prices to their customers.
Last month, Hershey cut its revenue and profit forecasts. Chief financial officer Steve Voskuil said high cocoa prices would now be the “biggest source of inflation” for the company.
Another food giant, Kraft Heinz, also recently cut its annual sales and profit forecasts as customers cut back on purchases after several rounds of price increases.
Some companies have sought deals to expand into new markets and increase growth.
In August, confectionery giant Mars signed a deal to acquire Pringles and Pop-Tart maker Kellanova for about $36 billion.
Some analysts predict an increase in mergers during the upcoming Trump administration as President-elect Trump looks more favorably towards making deals.