The Welsh Rugby Union met about the matter this week, with the hope of being able to reach a deal. However, the governing body instead came under fire from Mike James, the Ospreys chairman. He resigned dramatically at the beginning of the meeting, citing the WRU's "catastrophic mismanagement".
"None of us doubt that regional rugby requires restructuring in order to ensure the long-term sustainability of the game," James said in a statement released by the Ospreys. "The way in which this has been handled, however, is nothing short of chaotic. Project Reset has become Project Inept. I cannot, and will not, be a party to this level of catastrophic mismanagement."
Ospreys later claimed in a statement they were not on the verge of a merger with Scarlets.
Of the 21 players named in Wales' squad to take on Scotland this week, 13 play their club football with either Ospreys or Scarlets, and a merger of the clubs would leave many in limbo.
Former Welsh representative Lee Jarvis criticized the idea of the merger on Twitter.
Wales Online also released a transcript with "a leading Wales star" suggesting Welsh player make contract moves as soon as possible.
One message said: "Boys who are out of contract, if you want to say I'd try get your business done this week as there's going to be more boys on the market come Sunday!"
Another message said: "Or if you are looking for coin North Wales could be an option," adding "I think they will try pay decent money to get people up there."
"The Ospreys and Scarlets are merging, Blues and Dragons staying as we are. They're making a region in north Wales."