Discussions have focused on a tie-up in which Bertelsmann would have a stake of more than 50 per cent, according to several people familiar with the negotiations, who warned that several issues remained unresolved and talks could still fall apart. Pearson, which owns the Financial Times, confirmed discussions about "a possible combination" of the two publishers after FT.com reported the talks. "The two companies have not reached agreement and there is no certainty that the discussions will lead to a transaction," it said. Bertelsmann, whose senior executives were in China, declined to comment. The negotiations come at a time when large technology groups such as Amazon, Apple and Google are driving the ebook business and redefining the publishing industry. Analysts have predicted consolidation among the "big six" market leaders of the relatively fragmented publishing industry, citing shifts in the balance of power in an industry where independent bookstores are giving way to national chains and large technology companies who control ebook stores. "This is the lowest margin business within Pearson, and in an industry in flux there are reasons to combine forces and tackle technology challenges," said Tim Nollen, a Macquarie Securities analyst. Market shares move with the bestseller lists, but the combined group could control about a quarter of US and UK book and ebook sales. The Department of Justice this year sued Apple and five publishers, including Penguin but excluding Random House, alleging collusion. Three publishers settled the case, which did not address competition issues. Penguin is still contesting the matter. The terms of any deal are still under debate, people familiar with the talks said, but a successful merger would give each company more scale. Bernstein Research this year valued Penguin at up to £900m while Investec this month put Penguin's valuation lower, at about £650m. Analysts" valuations were not immediately available for Random House, whose parent company is privately held.