(Reuters) -Mallinckrodt and Endo ( NDOI ) are exploring a potential merger that could be valued at about $7 billion, person familiar with the matter told Reuters on Wednesday.

A deal could likely be announced as soon as Thursday, the person said. The two companies did not immediately respond to Reuters requests for comment.

Both Mallinckrodt and Endo ( NDOI ) have in the recent years faced lawsuits for their alleged role in the U.S. opioid epidemic. While Mallinckrodt emerged from its second bankruptcy in November 2023, Endo ( NDOI ) returned last year.

The drugmakers are discussing the terms of a transaction that would give each of them roughly 50% ownership of the combined entity, Bloomberg News, which first reported the deal, said, adding the company is expected to be listed on the New York Stock Exchange.

Mallinckrodt, which makes branded and generic drugs, first filed for bankruptcy in 2020 due to its high debt, litigation over its allegedly deceptive marketing of highly addictive generic opioids and disputes over its drug pricing.

As part of its second restructuring, the company was able to trim $1 billion from its previously agreed opioid settlement, that resolved about 3,000 lawsuits.

Endo ( NDOI ) used to manufacture and sell a long-acting opioid painkiller called Opana ER, which was withdrawn in 2017 after the U.S. FDA said its benefit did not outweigh public health risks associated with opioid abuse.

The drugmaker, which began its bankruptcy process in 2022, agreed to pay about $600 million in settlements to states and people afflicted by the opioid crisis and to stop promoting opioids to prescribers.

(Reporting by Anirban Sen in New York and Bhanvi Satija, Sneha S K in Bengaluru ; Editing by Arun Koyyur)