E-commerce giant Amazon.com, Inc. has completed its first level of talks to acquire Rocket Internet-backed lifestyle e-tailer Jabong.com in a deal worth $1.1-1.2 billion, in the biggest acquisition in the history of the Indian e-commerce space, two sources privy to the development told VCCircle.

It is not immediately clear how the deal would be structured as Jabong is an inventory-based e-tailer, where foreign investment is not allowed at present. Experts say the deal is bound to attract intense regulatory scrutiny given the heft of Amazon.

"The way the market is placed, fashion is the biggest category. However, it would not be possible for a general merchandiser to crack this industry without targeting inorganic growth," one of the sources privy to the discussion told VCCircle. 

Another source cited above said that Amazon would keep Jabong as a separate property post the acquisition. "It (deal) would be very much on the lines of Amazon's acquisition of Zappos in the US," he was quoted in the report as saying.

Besides Rocket Internet, Jabong also counts Swedish investment firm Kinnevik and UK's development financial institution CDC as a shareholder. Kinnevik owns 25% stake in Jabong.

The news of a possible Amazon-Jabong deal, started circulating way back in May, days before Flipkart announced a deal to acquire Myntra. Flipkart-Myntra deal, which was pegged at around $340 million, remains to date the biggest M&A in the e-com sector in the country.

Jabong reported gross merchandise value (GMV) of Rs 509.5 crore from 3.197 million orders in the January-June 2014 period. This marked a three-fold rise over the previous year.