Dairy co-operatives First Milk and Milk Link are close to a merger that will create Britain's largest raw milk producer.
The organisations said they expected to join forces within weeks, once due diligence was completed, to form a co-op that will produce three billion litres of milk a year - or 23% of total UK volumes - and generate an annual turnover of £1bn.
The organisations said joining forces would create synergies that would maximise returns to their 4,250 dairy farmer members across Great Britain.
"We have a creamery in Lockerbie, but we don't have many members in that area, and First Milk does," said Milk Link corporate affairs director Will Sanderson. "Conversely, we have many members around Bridgwater in Somerset, where Robert Wiseman is building a new fresh liquid milk factory. First Milk, which has a 15% stake in Robert Wiseman, doesn't have many members in that area. The two businesses complement each other very well."
The deal would mean co-ops had greater resources for research and development and NPD, he added.
The merger will require approval by the two co-ops' members and the Office of Fair Trading.