The dairy groups said the new feed partnership is projected to generate around £125m ($193.4m) annually.
Armagh headquartered, Fane Valley, and Cavan-based, Lakeland Dairies, currently have an annual feed manufacturing capacity of 310,000 tons and 190,000 tons respectively.
“The merger of both agribusiness operations will create a business with greater efficiencies, larger scale, buying power and the capability for future growth and service delivery across a larger geographic area,” said the co-operatives.
The pooling of both of co-operatives feed manufacturing, sales and store activities into a major agribusiness JV is to be managed by Fane Valley. Lakeland Dairies said it will be a partner and shareholder in the JV and will also be represented on the board of that operation.
The co-operatives said they are also merging their dairy processing activities and operations to get greater scale and efficiency to better address the growing worldwide market demand for dairy products – this business will be run by Lakeland Dairies, with Fane Valley as partner and shareholder in the set-up.
The dairy JV is set to process over one billion liters of milk annually, with annual revenues forecast at £480 million.
Both co-ops will otherwise continue to operate on an independent basis with separate activities outside agri-business and dairy but have not ruled out the prospect of a full merger in the coming years.
Lakeland Dairies, which is focused on ruminant feeds, operates a feed mill located in Monaghan.
Fane Valley supplies dairy, beef, sheep, pig and poultry feed and has feed production sites in Omagh and Newry.
In reporting on full year results in April 2015, that cooperative said its feeds division recorded a 6% decrease in revenues for the year ended 30 September 2014, linked to lower raw material costs but the unit achieved a 4% hike in volumes “maintaining the growth in tonnages secured” since the opening of a new mill in 2010.
Fane Valley said a significant refurbishment during 2014 now allows for higher throughputs in its Newry mill.
No one was available for comment at either Lakeland Dairies or Fane Valley.