LEG would offer TAG shareholders to exchange their shares for LEG stock, the group said in a statement.
“At this stage it is uncertain whether an agreement will be reached and whether a transaction will be announced,” LEG added.
Shares in TAG were up 4.6% at 1205 GMT, while LEG shares were up 0.3%, paring most of their earlier gains.
Both companies are listed in German mid-cap index MDAX .MDAXI and have a combined market capitalization of more than 10 billion euros ($10.9 billion).
Reporting by Thomas Seythal; Editing by Maria Sheahan