Eason and the UK newspaper and magazine distributor Menzies are close to sealing a joint venture deal to operate in the Republic and Northern Ireland.

If the joint venture is signed, a new magazine and newspaper distribution company will operate in the Republic from next year. Eason has denied the arrangement is a forerunner to an eventual takeover deal.

Gordon Bolton, chief executive of Eason, said this week there were two main reasons for trying to set up the joint venture company. One was that Eason could avail of new state-of-the-art IT systems that were now in demand from publishers. He said the second reason for seeking the arrangements was because coming together with Menzies would give the joint company negotiating strength with publishers.

Eason has declined to say whether job losses could result from the new arrangements, but the company said it was likely to lead to a shake-up of the market. Eason owns the subsidiary News Brothers, based mainly in the Munster region. But it is not clear what the joint venture might mean for subsidiary companies such as News Brothers.

Menzies is believed to have a 30 per cent share of the UK newspaper distribution market and 31 per cent of the magazine sector. On a daily basis it delivers 4.5 million newspapers and 2.7 million magazines to 22,100 customers.

The new company is expected to be called EM News Distribution and a head of business has already been appointed. A statement from Eason said yesterday: "The proposed joint venture appeals as it has the potential to benefit both publishers and retailers, whilst also maintaining the market position throughout the whole of Ireland for the joint venture partners. Discussions are still ongoing, which will require prior approvals before any further announcements can or cannot be made".

It is understood that Eason shareholders need to give their approval. Under the company's articles of association, such corporate developments as joint ventures need shareholder approval.