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Former poker giant PartyGaming recently set the stage for its recovery when it announced a $105 million non-prosecution deal with the U.S. Department of Justice. As soon as the deal was made public, Chief Executive Jim Ryan began talking up the possibility of industry consolidation in order that the smaller sites could mount a concerted assault on the current industry leaders.

Just three weeks after the settlement was agreed, The Times newspaper is reporting that a deal is in the work for PartyGaming to purchase Gigamedia, the parent company of Everest Poker. The two seem to be a perfect match, with Gigamedia having announced some months ago that they were in “discussions with several interested parties concerning the possibility of a strategic merger or a sale.” It has also been leaked that the company has hired Goldman Sachs to find a buyer either for the whole company or just Everest Poker.

PartyPoker and Everest both have a strong presence in Europe, and a consolidation between the two would provide a good platform for returning to the U.S. should the UIGEA be repealed. Everest is currently the 6th biggest network in the world, with PartyPoker a few spots ahead in 4th. A merger between the two would generate numbers almost as high as Full Tilt.

Gigamedia is estimated to be worth around $363 million, money Party would have to borrow and some industry experts have been skeptical about Party’s ability to generate enough capital for the deal in the current economic climate. Another potential spanner in the works, shareholders reluctance to relocate their investment from the NASDAQ to the London Stock Exchange (LSE).

Gambling Compliance have claimed that recent announcements by PartyGaming rule out any move in the near future. Last week it was revealed that Jim Ryan and Finance Director Martin Weingold were in line for performance related share options. Stock exchange rules require that your inform the market of any takeover deals in the works when you make such announcements. As no mention of Gigamedia or any other company was made at the time some have claimed that if any merger were to take place it would be some time in the future.

With PartyGaming looking to buy and Gigamedia looking to sell it seems that both companies will see major deals go through in the near future, even if not with each other. When contacted for comment by The Times a PartyGaming spokesperson did nothing to quiet the rumors, cryptically stating that “We have made it very clear we believe the industry will consolidate and we will look at opportunities as and when they arise.”