It has been reported that two of the online gaming giants Party Gaming and Bwin are to merge over the summer to create the biggest online gaming company.

Unnamed officials involved in the discussions stated, “The merger should be wrapped up this summer,” and added that the negotiations have reached an “intensive phase.”

Party Gaming, which is based in Gibraltar and listed on London FTSE 100, made a move in sports betting sector four years ago with the €102 million (£91.6 million) purchase of Gamebookers.

The prospects for the current rummoured merger are enchanced as the gaming giant agreed a settlement with the US Department of Justice in April 2009. The group paid $105 million (£65 million) to settle the case which has effectively closed the book on the possibility that PartyGaming could face prosecution over its activities in America before it withdrew in 2006 when President Bush introduced a formal ban on internet gambling.

In July, it announced the takeover of Cashcade, the owner of Foxy Bingo, for up to £96 million, and several months later it completed the acquisition of the majority of WPT Enterprises, the owner of the World Poker Tour, for a minimum of $15.3 million.

Like PartyGaming, Bwin has suffered regulatory problems in recent years, although in its case the country in which it has fallen foul of the law is France. In 2006, the group’s joint chief executives were arrested and then bailed after signing a football sponsorship deal with AS Monaco. In recent months, France has relaxed its protectionist gaming laws and Bwin is hoping to be a beneficiary.

While neither bwin or Party Gaming have commented on the potential merger, it has been no secret to the industry that the two companies have been in discussions. In December, after talks heated up, both bwin and Party Gaming officials quickly responded to the speculation with public statements to their shareholders and the media.

“The board of Party Gaming confirms that it is continuing to hold discussions with a number of companies in the gaming sector regarding potential consolidation opportunities,” the company said in a statement to the London Stock Exchange that was reported by the British newspaper The Guardian. “As all such discussions remain at a preliminary stage, there can be no certainty as to whether or not such discussions will result in any form of transaction.” In Format during the same time period, bwin Chairman and largest shareholder Hannes Androsch was quoted as saying, “Talks are going on, but we don’t know yet whether they will succeed.”

A merger of Party Gaming and bwin would result in the creation of an online gaming organization that would be worth nearly $4 billion. Party Gaming, with its still successful PartyPoker, would add an online sports betting arm in bwin that it has lacked since its creation as well as customers from bwin’s online poker operations. Neither PartyPoker nor the Ongame Network allows American action although this may change. Party Gaming are hoping to be able to re-enter the US market under the current government. Jim Ryan, PartyGaming chief executive, commented: “We’re hopeful that, in the fullness of time, the new (Obama) Administration will take steps to regulate it.”

The recent rumors of a merger date have had no effect on the stock prices as both companies finished off on Friday slightly down. In December when initial rumors surfaced both companies saw a sharp rise in their share prices. When the comments were first reported it was described as a “merger of equals” although analysts said that Party Gaming had the resources attempt an outright acquisition in cash and shares.