Food manufacturer Northern Foods has agreed to merge with Ireland's Greencore Group to create a combined group with annual sales of around £1.7bn.
The deal will see the creation of a combined business to be named Essenta Foods which will be headquartered in Dublin, the companies said in a joint statement.
Northern Foods shareholders will receive 0.4479 of a new Greencore share for each Northern Foods share they hold. Greencore and Northern Foods shareholders will hold about 50 per cent of the combined group.
The companies are targeting cost savings of about £40m per annum to be realised within three years from the merger, which they expect will complete during the second quarter of 2011.
"The proposed merger is a great opportunity to develop fully the potential of both companies," Northern Foods chairman Anthony Hobson said.
Northern Foods makes own-label products for retailers as diverse as premium food seller Marks & Spencer and discounter Aldi. Its brands include Goodfella's Pizza and Fox's biscuits. Greencore is one of Britain's biggest sandwich and ready- meals-makers.