Gaopeng.com, a joint venture between Groupon Inc, a group-buying website, and Tencent Holdings Ltd, China's largest Internet company by sales, is in talks about merging with a rival, said an industry source.

Management at Gaopeng is considering integrating the company with Ftuan.com, a group-buying website in China, a person with knowledge of the matter said.

The possible deal comes at a time when the country's group-buying industry, which offers a means of obtaining discounted prices on products that a specified number of customers have agreed to buy, is undergoing a reshuffle as thousands of companies try to compete in it.

Details of the deal are still not clear, the person said.

The group-buying deals offered on Gaopeng are all "about to become due", the company's website was saying at press time. Usually, deals are listed alongside the amount time that is left in them.

Tencent declined to comment on the matter. An e-mail enquiry to Gaopeng was not immediately answered by press time, and a call to Ouyang Yun, chief operating officer of Gaopeng, went unanswered.

Gaopeng went online in early 2011 after boasting that it would become the biggest player in its industry. Despite the claim, its transaction numbers put it in 11th place in February among large group-buying websites in the country, according to Tuan800.com, a group-buying navigating website.

Groupon is the biggest group-buying website in the world.

Gaopeng didn't give itself enough time to prepare to go online, Pony Ma, Tencent's chairman and chief executive officer, said in an industry forum last year.

Gaopeng has been in and out of the spotlight this past year. In May 2011, it was tarnished by a lottery scandal — in which the two winners of the contests' prizes turned out to be on its payroll — management changes and a large layoff.

By the end of February, 3,626 group-buying websites were operating in the country, according to Tuan800. When the industry first came to China in March 2010, there was a craze for it among shoppers. But it has begun to show cracks in the past two years following its overly quick expansion.

Domestic group-buying websites had about 1.46 billion yuan ($231.5 million) in transactions in February, an increase of 224.9 percent from the same period last year, according to Tuan800.