The Campbell Bewley group, which owns the Bewley chain of cafes, is in negotiations to acquire the family-owned Kylemore Bakery company. The managing director of Campbell Bewley, Mr Michael Cummins, said there was goodwill on both sides to complete a deal, after discussions opened with the owners of Kylemore, the Hogan family, last year.

The managing director of Kylemore, Mr Brian Hogan, has had an 80 per cent equity stake in the company since 1989. "We have been discussing the potential synergies for us to acquire the Kylemore group," Mr Cummins said. Campbell Bewley has seen rapid expansion since last August when it acquired, for about £5 million, the Boston-based Rebecca's Cafe and catering business which has an annual turnover of about $20 million (£14 million). The first Bewley's US outlet is planned to open later this year.

In January the group announced a further expansion into Britain with the acquisition of two contract catering companies, Caterwise and Effective Partnerships, for £3 million.

The move increased the group's number of catering contracts there to 200, with a projected turnover of £21 million. Mr Cummins has stated previously that the group aims to be the fourth-biggest company in the British contract catering market by the end of the year, after Gardner Merchant, Sutcliffe and Compass. Kylemore was founded in 1920 and currently has nine cafes and 30 bakeries in Ireland. It had a turnover of £22 million in the year to April, 1996.

Employing about 800 people, Kylemore branched into the parbaked frozen bread market in 1996 when it invested £3.5 million in its main bakery plant at McKee Avenue in Finglas, Dublin. It supplies the main multiples and does contract business for Cuisine de France, the leading par-baked bread company.

Kylemore's self-service cafes, comprising about a third of its turnover, are located in prominent urban locations. In Dublin city centre, they have premises on O'Connell Street and in the St Stephen's Green shopping centre. It is a major competitor to Campbell Bewley in the Republic where there are over 30 Bewley's outlets.

Mr Cummins said that the two merged companies would have a combined turnover of £160 million but that they would not be a major force in the restaurant business.

Campbell Bewley reported pre-tax profits of £2.5 million for 1996, an increase of 50 per cent over the previous year. Turnover increased by 19 per cent to £68 million.