German sports goods firm Adidas-Salomon says it has struck an agreement to buy US rival Reebok for 3.1bn euros ($3.8bn; £2.1bn).
Boss Herbert Hainer wants Adidas to take a big leap forward
The tie-up could create a challenger to Nike in the US market.
Adidas boss Herbert Hainer said that the deal "represents a major strategic milestone for our group".
The takeover still needs to be approved by Reebok shareholders and competition authorities. If cleared, the deal should be completed in early 2006.
Reebok's shares rose 30% on Wednesday - reaching $51 - as reports of takeover talks appeared on the websites of financial papers.
Adidas' offer is worth $59 per share in cash.
"This is a once in a lifetime opportunity to combine two of the most respected and well-known companies in the worldwide sporting goods industry", said Mr Hainer.
The combined group will have worldwide athletic footwear sales of 9bn euros, Adidas said.
The list of celebrities promoting Adidas includes football star David Beckham and singer Missy Elliott. Reebok tried to rejuvenate its youth appeal with a controversial advert featuring rapper 50 Cent. Its US sport licensing deals include the National Football League and National Basketball Association.
North America accounts for roughly half of the global sporting goods market, and Adidas said buying Reebok would more than double its North American sales to 3.1bn euros.
The firm added that the deal would bring it wider geographic reach and a more balanced sales portfolio. Among the benefits, it listed Reebok's presence in North America and Adidas' ability to bring its greater expertise in Europe and Asia to bear on Reebok's profile there.
The combined group's brands will be anchored by the Adidas and Reebok labels, but will also include Taylormade, Rockport, Greg Norman Collection, Maxfli, CCM, Jofa and Koho.
It would have about 20% of the US sports shoe market, while Nike has 36%.
Adidas was known to be targeting a stronger position in the US market.
In May, it sold off its struggling Salomon winter sports equipment business to Finnish firm Amer in order to concentrate on footwear.
As it announced its takeover plans, Adidas also unveiled better-than-expected profits.
Its second-quarter net profits jumped 33% to 94m euros, after adjustments were made for the sale of the Salomon business.
Sales rose to 1.5bn euros from 1.4bn in the same period a year earlier.
It expects a further boost to sales from the 2006 World Cup Championship which is taking place in Germany.