Arrabawn Co-op, the Tipperary-based animal feed and dairy group with turnover of €220 million, has been approached by rival Dairygold, to see if it was interested in merging.

Earlier this year Dairygold submitted a proposal which suggested a merger be explored, to the board of Arrabawn, which is chaired by dairy farmer Seán Monahan, according to the Irish Farmers' Journal.

Arrabawn chief executive Conor Ryan was unavailable for interview yesterday but the co-op issued a briefing note to The Irish Times addressing "reports of proposals for merger" between it and other milk processors.

“We are in regular contact with other processors to discuss points of common interest, and the question of how we could work closer together, to improve efficiencies, and to increase the returns for our suppliers, is frequently raised,” the note prepared by Mr Ryan said.

“Anything we can do to improve our profitability, and the returns we pay our suppliers, is looked at very carefully, and if that means closer cooperation, such as a merger, that is something our directors and the management team would look at seriously,” it added.

“However, there’s nothing formal on the table at present, but it is something we are examining, and should we decide to go down that road then we’ll be informing our shareholders/ suppliers what the situation is.”

Arrabawn strongly rejected a suggestion that a group of up to 40 of its 980 suppliers was planning to leave the co-op.