Dive Brief:

• Petco is in early talks with PetSmart to be acquired by its rival, sources have told CNBC and Reuters.

• The talks come after PetSmart ruled out an earlier proposed deal with Petco, deciding instead to be acquired late last year by London-based BC Partners for $8.7 billion, a deal that closed in March. 

• Petco has also been readying for a possible initial public offering. Both companies are privately held.

Dive Insight:

Like most retailers, pet supplies companies have increasingly faced competition from online pet retailers as well as general retailers like Wal-Mart Stores, Target, Amazon, and supermarkets that have increased their pet-supply sections.

San Diego, CA-based Petco had some $4 billion in sales in 2014 and Phoenix, AZ-based PetSmart had net sales of $7.1 billion that year. The two companies dominate pet sales in the U.S. and it’s unclear whether a merger would pass muster with federal antitrust regulators.