Freshways and Medina Dairy will merge to form a new business called Medina Freshways Ltd, the milk processors have confirmed.
The merger is subject to regulatory approval by the Competitions & Markets Authority (CMA), and is expected to come into effect before the end of the year.
According to the processors, Medina Freshways Ltd would have a combined turnover of £400 million, employ 1,000 staff and process around 500m litres of British milk per year.
The processors added that the merger would create a new business with the 'requisite scale and agility to compete with the two large players which dominate the dairy sector in the UK'.
Medina CEO Sheazad Hussain and Freshways group managing director Bali Nijjar have been appointed joint managing directors.
“Throughout our discussions it has become increasingly apparent how complementary both businesses’ capabilities and cultures are,” Hussain and Nijjar said in a joint statement.
“As such, through merging we will be able to harness these synergies to create a leaner, more agile and fit for purpose business.
"A business that will benefit customers, consumers and suppliers and ultimately, we believe, will be well placed to grow and develop in a sustainable manner for the long term.”