Britain's two largest car dealership groups are in advanced talks for a potential GBP1bn merger which could net the family of Sir Peter Vardy more than GBP118m, the Daily Telegraph reported.

According to the paper, Sir Peter is chief executive of Reg Vardy, which on Wednesday (16 November) admitted it had received "an unsolicited approach" from market leader Pendragon that could lead to a cash takeover at 750p a share.

The Daily Telegraph said this offer would value Vardy's equity at GBP422m, and added that the stockmarket welcomed the news, pushing Vardy shares up 68p to an all-time high of 730p and driving Pendragon 45p higher to 467¾p, where it has a market value of GBP614m.

According to the paper, talks, which began about a fortnight ago, are said to be progressing well, with a potential deal said to be "weeks, but not days, away".

The Vardy group, which began selling cars in the late 1950s has around 100 car dealerships, including prestige marques such as Aston Martin and Ferrari, selling 200,000 vehicles a year and employing about 6,000 staff, the Daily Telegraph said, adding that it was unclear whether Sir Peter would sell out completely.

The paper noted that any merged group would be run by Pendragon's acquisitive boss Trevor Finn, who last year purchased smaller rival CD Bramall for GBP230m. Last August Finn said that, in a sluggish car market, there were "more opportunities than ever", for buying smaller rivals, the report added.

The Daily Telegraph said Vardy's dealerships are mainly in the north east and Scotland, while Pendragon's 250 are in the north west, Midlands and southern England. The pair would have about 5% of Britain's new car market, so there are unlikely to be competition issues, the paper added.