Two big drinks firms are holding discussions about a merger that could create the world's biggest wine company.

US business Constellation Brands, whose wines include Ravenswood and Stowells of Chelsea, is considering a merger with Australia's BRL Hardy.

Constellation Brands

Paul Masson Nobilo Ravenswood Stowells of Chelsea

The companies already run a joint venture, Pacific Wine Partners, which markets the Australian firm's wines in the US.

"Discussions with BRL Hardy regarding a possible transaction are taking place, but we have not yet reached agreement on a structure or transaction value," Constellation chairman and chief executive Richard Sands said.

"Bringing together Constellation and BRL Hardy would create the world's largest wine business, with leading positions in the world's key markets."

Cider and beer

He said the tie-up would broaden the company's range of wines and enable it to emphasise the fastest growing category - "new world" wines from the US, Australia, New Zealand and Chile.

BRL Hardy

Banrock Station Stamp of Australia Nottage Hill La Baume

The discussions are at an advanced stage and both companies have signed break fee agreements.

But Mr Sands said there were no assurances that any transaction would be agreed.

BRL Hardy is Australia's biggest wine company and was formed in 1992 when Berri Renmano joined together with family-owned Thomas Hardy & Sons.

Constellation Brands produces cider and beer as well as wine.

In the UK it owns Matthew Clark, maker of Blackthorn cider.