Egg producers Deans Foods and Stonegate unveiled plans to merge this week, forming the biggest egg supplier in the UK with half of the market.

A major swing in demand towards free-range and organic eggs is said to have fuelled the drive for greater efficiencies in collecting, packing and distributing eggs to shore up margins.

The new company will be called Noble Foods and post a turnover of £450m, although it will keep its Deans and Stonegate brands. Both companies said that sharing distribution networks and production costs would create greater efficiencies than attempts at reducing production costs.

The new company will handle just under 50% of all eggs laid in the UK - some 4.4 billion a year from 18 million birds. The OFT has been notified, but no competition issues were envisaged, the company said.

Deans Foods' merger spokesman Peter Challands said: "The massive swing in the UK market from cage to free-range and organic has meant that the industry has gone back to being much more fragmented, with smaller units scattered more widely, and this puts a premium on collection, packing and distribution networks.

"The major multiples are constantly looking for margin improvement, so if you are going to keep the customer happy you have to achieve efficiencies within the supply chain."

Challands said that it would be business as usual for the merged company, which would not use its greater size to apply pressure on the multiples.

"The Lion Brand does provide some protection because the eggs are produced to a higher standard by hens vaccinated against salmonella," he said.

"But there are chains that import eggs and some retailers can hold that threat over suppliers."