The merger of Avonmore and Waterford co-ops has been approved by the Tainaiste and Minister for Enterprise, Trade and Employment, Ms Harney.
An early decision was not expected but yesterday both co-ops welcomed the decision. It means the deal will not now be referred to the Competition Authority.
When the co-ops finally merge later in the year, the company, to be known as Avonmore Waterford Group (AWG) will become the world's fourth largest milk processor.
Ms Harney said "the merged entity will create a truly global player of scale which will benefit the overall national interest as well as the shareholders of the new company.
"AWG will be a considerable force in the international food processing industry and will enjoy a position of considerable strength that few Irish firms have attained," she said.
The merger has already been approved at two special meetings of shareholders of both co-ops.
Ms Harney said that scale, such as that envisaged by AWG, was now required to underpin competitiveness and an ability to penetrate and compete effectively on European and world markets.
She said there were dangers in "concentrations in any sector" notably in the liquid milk market in Dublin and Leinster. However, she said the "new pro-active enforcement powers of the Competition Authority and the Director of Competition Enforcement will ensure there is no abuse by AWG of its market position that is contrary to the interests of consumers and the competition code".
It is estimated that AWG will now control up to 70 per cent of the liquid milk market in Dublin. Much of the market is already dominated by Premier Dairies which is owned by Avonmore.
In a joint statement, both coops said they "noted" Ms Harney's remarks about the liquid milk market and said they were confident the new group would "comply fully with the spirit and letter of the competition code".
On the question of the food sector generally, Ms Harney said "enhancing competitiveness across a range of headings is essential, as is renewed focus on rationalising the sector's structure into larger, more cost effective entities".
"A range of key success factors need ongoing attention among Irish food companies, including quality, cost competitiveness, innovation, customer orientation, under-investment and ineffective international market penetration," she added.
The news of Ms Harney's approval contributed to a 5p rise in Waterford's shares which closed at 180p, while Avonmore's shares price rose by 1p to 315p.
