Two listed advertising rivals have announced plans for a potential £260 million all-share deal.

Video advertising platform RhythmOne confirmed the discussions with Tapitica and said the merger “would create one of the leading video advertising companies in the US”.

The company is listed on the London Stock Exchange and headquartered in San Francisco, California with other locations in the US, UK and Canada.

The deal will be structured as an all-share takeover of RhythmOne, which was founded in 2004, by AIM-listed Taptica International.

Founded in 2007, San Francisco-based online marketing network Taptica is RhythmOne’s biggest rival, and serves the likes of Amazon.com, Disney and Twitter.

Sources close to Sky News have said that the deal was aimed at forging a more powerful competitor to Google and Facebook, and could create a business with $700m in revenue.

Taptica, which confirmed the talks with a statement of its own, has until February 26th to make a firm offer for RhythmOne.

The deal, which will be subject to the approval of both sets of shareholders, is expected to be announced later this week.