Galliford Try said in a statement that Bovis intented to buy Galliford Try's Linden Homes and Partnerships & Regeneration arm in exchange for new Bovis Homes shares.

Sky news, which reported the deal-talks first, cited a Bovis insider saying it was unlikely Bovis would be interested in Galliford Try's troubled construction division, which was responsible for a recent profit warning.

If the companies pursue a full merger, the combined entity could be valued at about 2 billion pounds ($2.5 billion) and a significant chunk of any offer from Bovis for part or all of Galliford Try is likely to be in shares, Sky News said.

Bovis Homes Group declined to comment.

(Reporting by Rishika Chatterjee and Maria Ponnezhath in Bengaluru; Editing by Alexander Smith)