German real estate companies LEG Immobilien and TAG Immobilien are in talks about a potential combination of their businesses, LEG said on Friday.

LEG would offer TAG shareholders to exchange their shares for LEG stock, the group said in a statement.

"At this stage it is uncertain whether an agreement will be reached and whether a transaction will be announced," LEG added.

Shares in TAG were up 4.6% at 1205 GMT, while LEG shares were up 0.3%, paring most of their earlier gains.

Both companies are listed in German mid-cap index MDAX and have a combined market capitalisation of more than 10 billion euros.

(Reporting by Thomas Seythal; Editing by Maria Sheahan)