Sodiaal, France's largest dairy cooperative with 4.1 billion litres of milk handled and 4.4 billion euros in sales last year, will merge with its smaller peer in a deal that could be completed at the end of the year, the groups said in a statement on Tuesday.
"This tie-up ... will allow them to join forces in a context of changes expected in the dairy sector from 2015 with the end of production quotas," the statement said.
The scheduled scrapping of European Union production limits is expected to encourage farmers and processors to expand output and concentrate capacity in certain regions and plants.
The overhaul of EU dairy rules is controversial in France, the bloc's top farm economy and home to many small-scale producers. The country has been seeking measures to help livestock farmers as part of a wider reform of EU farm policy that could be finalised on Wednesday.
Sodiaal also plans to close three plants in France operated by its milk brand Candia to boost profitability in a segment that offers lower margins than cheese or yoghurt.
Its other interests include a 49 percent stake in yoghurt maker Yoplait alongside U.S. food group General Mills.
