Japanese moneylender Promise will announce a tender offer to buy smaller rival Sanyo Shinpan Finance later on Thursday, sources close to the deal said.
Sanyo Shinpan is excepted to agree to the takeover, a potential $1.1 billion deal that could mark the start of consolidation in an industry squeezed by government efforts to cut excessive loan rates.
The deal would put Promise, now Japan's third-largest consumer lender in terms of loan balance, on a par with industry leader Aiful's nearly 2 trillion yen.
It was unclear how much Promise planned to pay for the acquisition, but buying all the shares of Sanyo Shinpan would cost about $1.1 billion, based on the current market price.
A spokesman for Promise said nothing had been decided about a takeover.
Promise, which plans eventually to turn Sanyo Shinpan into a wholly owned subsidiary, will also acquire asset management company Asahi Enterprise Co. as part of the deal, the sources said.
Asahi Enterprise owns one-fourth of Sanyo Shinpan and is affiliated with Sanyo Shinpan Chairman Masakazu Shiiki.
Japan's moneylenders have been hit hard by demands to repay interest charges ruled illegally high by courts, while stricter usury laws approved last year have raised concern about future profits.
Many moneylenders have fallen deep into the red and have been forced to cut jobs and shrink their branch networks.