Mitchells & Butlers (M&B) is in talks to acquire Punch's managed division Spirit Group.
Punch Taverns withdrew its merger proposal for M&B last month - which involved a 50/50 merger with a cash payment of £175m for M&B shareholders.
Under the original proposal a merger between Punch and M&B would have created a business worth £11bn and the creation of an estate of 10,400 pubs.
An M&B statement said: "The Board believes that significant value through enhanced sales and profitability can be created by integrating Punch's managed pub business into Mitchells & Butlers operational and brand structure.
"The Board has now initiated an approach to Punch to explore whether terms for such a mutually beneficial transaction can be agreed.
"The Board is actively considering how such an acquisition of Punch's managed pub business could be best funded.
"One form of funding being considered is the basis on which the private equity investors, who support Mitchells & Butlers strategy of consolidation, might invest in the Company."
One possible route would be for M&B to use any fresh finance to buy Spirit.
An alternative route would see Punch Tavern swapping Spirit for a stake in a bigger M&B.
At least one Punch investor Marshall Wace is reported to want Punch executives to focus on running its tenanted business.
M&B's strategic review comes after the company booked an almost £400m pre-tax loss on a hedge position it entered into ahead of an aborted property deal with Robert Tchenguiz's R20.
Three private equity groups - Permira, Bain Capital and, working together, Blackstone and CVC Capital Partners - are understood to be interested in taking a stake of up to 29.9% in M&B.