Cavan-based Lakeland Dairies has agreed a deal to buy the dairy business of Fane Valley, for an undisclosed sum.
The two co-ops had sought to establish a joint venture involving both dairy and agri-business but have now scrapped that in favour of an outright acquisition by Lakeland of Fane Valley's dairy unit.
The purchase will push Lakeland's annual volume of milk processed past the one billion litre mark, consolidating its position as Ireland's third largest processor behind Glanbia and Dairygold.
Lakeland co-op chief executive Michael Hanley said the cross-border deal would help it secure the interest of milk suppliers.
It would also reinforce what he said was its commitment to "pay the highest possible milk price to all our producers".
Trevor Lockhart, chief executive of Banbridge, Co Down-based Fane Valley, said the original joint venture strategy the two companies had settled on last year and which he had described as "far sighted" as recently as August 2015 was deemed too complex following an in-depth assessment by both co-ops.
"It was evident that some of the complexities involved in establishing and operating a cross-border JV of this nature were going to detract from the key strategic purpose of the merger and the ability to fully realise all commercial synergies," he said.
