(Adds statement from companies)
By John Tilak and Alastair Sharp
TORONTO, Oct 7 (Reuters) - Canadian online gambling company Amaya Inc AYA.TO AYA.O and British bookmaker William Hill Plc WMH.L said they were in talks to combine in a merger of equals, confirming a Reuters report about the discussions earlier on Friday.
The all-share merger would be "consistent with the strategic objectives" of both companies, they said in a joint statement.
Amaya has received strong buyout interest from other companies in the industry and some private equity firms, two sources familiar with the situation said.
The statement did not mention GVC Holdings Plc GVC.L , a sports betting and gaming company based in the Isle of Man which the sources had also cited as a suitor. The sources spoke on condition of anonymity because they were not authorized to discuss the matter publicly.
GVC did not respond to a request for comment.
The sources also said that former Amaya Chief Executive David Baazov, subject of an insider trading investigation from Quebec's securities regulator, had abandoned plans to bid for the company. Amaya said in February it had received a nonbinding proposal from Baazov to take the company private, but the formal bid never came. bids for the operator of online gambling website PokerStars were above Baazov's planned offer price of C$21 per share, the sources said.
Amaya's stock jumped on the Reuters report and trading was halted within minutes, at C$23.41, up 9.1 percent on the day, in Toronto. The level was the highest in about 11 months. The company had a market capitalization of about C$3.1 billion ($2.34 billion) before the rally.
Baazov had prepared a bid but waited to sort out issues with the securities regulator before submitting it, the sources said. He was mulling a bid as recently as the summer, they said.
Baazov resigned as CEO in August and was replaced by Rafi Ashkenazi.
William Hill, itself a subject of an approach from 888 Holdings 888.L and Rank Group RNK.L , rejected a revised takeover bid from the two rivals in August. paid $4.9 billion to acquire the owner and operator of the PokerStars and Full Tilt Poker brands in 2014, saying at the time that the deal created the largest publicly traded online gaming company.
The company's biggest revenue contributions are from the Isle of Man and Malta, while it has also expanded into France, Italy, Spain and Britain, and expects to soon gain regulatory approval to operate in the Czech Republic and the Netherlands. It sees its biggest growth opportunity in the United States.
After a lengthy approval process, Amaya won permission to operate PokerStars in New Jersey, one of the first U.S. states to legalize the business.
The company last year limited the operations of its StarsDraft fantasy sports business in most U.S. states as a string of jurisdictions grapple with whether the fast-growing, multibillion-dollar industry constitutes illegal gambling.
Contests such as StarsDraft, in which players draft fantasy teams for sports including football, basketball and baseball, have drawn increased scrutiny from regulators since last year.
($1 = 1.3256 Canadian dollars)