Major Japanese retailer Aeon is considering a merger that would create a drugstore giant. The company wants to combine its pharmacy subsidiary Welcia Holdings with another major drugstore chain, Tsuruha Holdings.

Aeon already owns a more than 50 percent stake in Welcia, Japan's largest chain of drugstores.

The retailer is in negotiations to buy shares of Tsuruha Holdings from Hong Kong based investment fund Oasis Management. The deal would give Aeon over 26 percent of Tsuruha's shares and make it an affiliate.

The deal would also see Welica and Tsuruha combine their businesses, creating a massive drugstore chain with sales of about 13 billion dollars.