Paddy Power owner Flutter Entertainment has confirmed it is in talks with gambling software firm Playtech to buy its Italian betting business in a deal which could fetch about £2 billion.

Flutter said it was in discussions to acquire Snaitech, one of Italy’s biggest gambling companies.

It followed reports earlier on Wednesday that a potential deal was on the cards that could be worth about £2 billion.

Playtech, which provides technology for sports betting and gaming firms, said it had granted Flutter a “period of exclusivity to complete due diligence and finalise the necessary transaction documentation”.

Both parties stressed that there was no certainty over a firm offer being made.

Shares in Flutter, which owns a swathe of brands including Betfair and FanDuel, surged by more than a 10th on Wednesday with financial markets also reacting to the release of its half-year financial results.

The global sports betting business reported a 20% increase in revenues over the three months to the end of June, compared with the same period last year, totalling 3.6 billion US dollars (£2.8 billion).

It also reported a 17% jump in adjusted earnings over the period, and said it was upgrading its predictions for the full year.

The business moved its primary stock market listing from London to New York earlier this year, as part of efforts to sharpen its focus on growth in US markets.