HELSINKI, Aug 22 (Reuters) - Shares in Finnish-Swedish forestry group Stora Enso rose four percent on Wednesday after a report said the firm was in merger talks with industry leader International Paper (NYSE:IP - news) of the United States. At 0710 GMT Stora Enso was up 48 cents at 12.80 euros, outperforming a weak Helsinki bourse (^HEX - news). IP shares ended flat overnight at $41.04 on the New York Stock Exchange. Swedish daily Dagens Industri on Wednesday said that the world's largest papermaker International Paper and global number-two paper producer Stora Enso were in merger talks, without identifying its sources. A link-up would create a forest industry giant with combined 2000 net sales of about $40 billion, dwarfing all rivals. Stora Enso officials declined to confirm or deny the report. Initial reaction from analysts on a potential deal was positive. "A merger could get through (comptetition authorities), but not without some juggling... there are some overlaps in their businesses, and they will have to deal with that, but it should not be a deal-breaker," one Helsinki-based analyst said. ``When it comes to competition, this says that sector consolidation will continue, it shows the top spot will remain with these groups, and it would be pretty close to becoming the first really global business,'' he said.