Allenberg Cotton Co. and Dunavant Enterprises Inc., both based in Memphis and once fixtures on the iconic stretch of Front Street that used to be a thriving hub of cotton commerce, are in talks to combine their operations.

“We are deep into negotiations, but we have not finalized everything yet,” Allenberg CEO Joseph Nicosia told The Daily News Thursday morning. “We’re both optimistic and have a positive outlook on the potential outcome. And we’re going to continue moving down that road, going through our due diligence process and talking to employees.”

Nicosia would not comment on what prompted the merger talks. Dunavant CEO William B. Dunavant III said the talks are still in progress but both companies felt they were far enough along that a public statement should be made.

Allenberg, a division of Louis Dreyfus Commodities, was founded in 1921 and first operated out of two rooms in a building on Front Street’s famed Cotton Row. The namesake of Dunavant Enterprises, William Buchanan Dunavant, started trading cotton on Front Street in his 20s a few years after Allenberg was founded.

“Dunavant Enterprises and (Allenberg) are in discussion about a potential transaction to merge their global cotton operations,” Dunavant said. “Dunavant and Dreyfus are obviously very active participants in the world cotton market, and we believe this merger will be a very positive event for both companies as well as the industry. We will be providing details of the transaction as the negotiations continue, and the details of the transaction have not yet been finalized.”

Dunavant employees were informed Wednesday afternoon of the pending combination of the two cotton giants.

Allenberg’s combined U.S. and foreign shipments topped 7 million bales in 2007, according to the company. Dunavant handles more than 6 million bales of U.S. and foreign cotton each year.