Halfords is the target of a £1.4bn merger approach by van rental firm Redde Northgate. Discussions took place over the past few months and a nil-premium merger was initially proposed. The initial proposal was abandoned due to disagreements over price. It is now understood Redde Northgate, who’s non-executive chairman is Avril Palmer-Baunack, could mount a fresh bid if the valuation gap between the two businesses closes.

Palmer-Bauback is also the Executive Chair of Constellation Automotive Group which owns Marshall Motors, BCA, Cinch and We Buy Any Car.

“Both share prices weren’t doing fantastically well at the time so there is nothing live at the moment,” said a source close to the negotiations. “However, it could come back.”

Redde Northgate has a market cap of £843m. Halfords, whose annual turnover last year was £1.6bn, has a valuation of £512m.

At current values, a nil-premium merger would value the combined company at £1.4bn.

Halfords is also amongst the bidders for Wiggle, the online bicycle chain which fell into administration last month.

Both Redde Northgate and Halfords declined to comment to The Telegraph on the reports.