MELBOURNE, AUSTRALIA - LION Nathan, Australia's second-largest brewer, has made a cash and scrip takeover proposal for soft drinks group Coca-Cola Amatil valuing the group at up to A$7.66 billion (S$7.5 billion), Amatil said in a statement on Monday.

Lion Nathan's spokesman declined to comment on the report in the Australian Financial Review, which said merger talks between the two groups to create an A$11 billion (S$10.76 billion) drinks giant had intensified in recent weeks involving both groups' parent companies.

Lion Nathan, whose brands include Boag's, Tooheys and 'XXXX', is 46 percent owned by Japan's Kirin Brewery, while Coca-Cola Amatil is 30 percent owned by US-based The Coca-Cola Company.

The talks come at a time of upheaval in Australia's drinks market with Lion Nathan's bigger rival, Foster's Group, trying to decide what to do with its troubled wine business, the world's second-largest.

North American brewer Molson Coors Brewing Co TAP.TO earlier this month emerged as holder of a 5 per cent interest in Foster's.

Both Lion Nathan and CC-Amatil have been looking for acquisitions as growth slows. CC-Amatil recently missed out on buying the Frucor beverages business in Australia and New Zealand, sold by France's Groupe Danone, and has said it was interested in Britain's Cadbury's Australian Schweppes business.

Lion Nathan's parent Kirin has also been expanding in Australia as its home beer market shrinks. Last week it sealed a A$910 million deal to buy milk co-operative Dairy Farmers through its National Foods arm in Australia.

It was not clear if National Foods would be involved in any deal with Coca-Cola Amatil, the Australian Financial Review said.

CC-Amatil has broadened its focus from fizzy drinks to include bottled water and canned fruits and vegetables. It also has a beer joint venture, Pacific Beverages, with SAB Miller, which markets and distributes Peroni Nastro Azzurro and Miller Genuine Draft.

Lion Nathan last traded at A$8.95, valuing the group at A$4.8 billion, while CC-Amatil last traded at A$8.25, valuing the group at A$6 billion.