The Co-operative Group and United Co-operatives have announced that talks exploring the merger have commenced.
If the proposal gets the nod, the new society will operate 2,321 stores. It will create the largest consumer-owned co-operative in the world with a turnover of £10.5bn.
In a separate move, Leeds and Sheffield Co-op have agreed to join United, which itself merged with Yorkshire Co-op in September 2002. Elsewhere, Nith Valley Co-op in the west of Scotland is to join the Co-operative Group as a means of tackling a growing pensions deficit.
Commenting on the possible Co-operative Group and United merger, chief executive of Co-operativesUK Pauline Green said: "Co-operativesUK supports the idea of mergers from a position of strength. If the talks are successful, the challenge for the new society will be to ensure membership rights are sustained, member engagement and participation continue to be developed and that the merged society fully recognises its role at the heart of the entire co-operative movement."