Carbury Mushrooms will merge with Monaghan Mushrooms in a move that will create the largest player in the European mushroom industry.
The merged entity, which will trade under the Monaghan name, will manufacture around 5,000 tonnes of mushroom substrate and sell 40,000 tonnes of mushrooms annually to customers in the UK and Ireland.
It will have net assets of around €11 million, employ around 1,500 people and will continue to operate from six locations in Britain and seven on the island of Ireland.
Under the terms of the merger, Monaghan shares will be issued to Carbury's two shareholders, Donegal Creameries and Connacht Gold Co-Operative Society. They will own 40 per cent of the new entity, with Donegal taking a 23 per cent stake in the new company and Connacht Gold owning 17 per cent.
Both companies will appoint two nominees apiece to the Monaghan board of directors while two new independent directors will also be appointed.
The merger has already been discussed with the Competition Authority which is understood to have no difficulty with the deal.
The mushroom industry has had a difficult time of late, suffering margin pressure in the important UK market due to currency pressures and more competition from eastern Europe.
Carbury is expected to report a retained loss of around €1.7 million for last year while Monaghan management anticipates a retained loss of €4.9 million for the 16 months to last December.
The merger, however, is expected to lead to significant benefits in terms of compost production and savings on the logistics and distribution side of the business, according to the chief executive of Donegal Creameries, Mr John Keon.
On the issue of job losses, he said there might be some overtime but he could not be specific.
Meanwhile, parts of Carbury's Gateforth site in Yorkshire are not needed by the new firm and will be sold. Mr Keon said discussions were continuing with UK planners and it might be some time before a sale took place. But Donegal stands to receive around €2.6 million from the disposal.