Food groups Greencore and IAWS have agreed on how to combine their flour businesses. It is understood the structure of a deal is in place whereby the two food groups would jointly own and invest in Greencore's Odlums flour business. However, the deal would require approval from the Department of Enterprise, Trade and Employment.

There has been speculation for some months that the two companies were planning to merge their Irish flour operations. Greencore's Odlums subsidiary is the Republic's largest flour miller, supplying half of the market from its four mills. IAWS' Bolands operation, based in Dublin's Grand Canal Docks area, has one. This may now be closed with the Odlums mills handling most of the market.

IAWS, which owns the Cuisine de France brand, was keen to retain an investment in flour, to support its expanding bakery business. The company had originally intended to build its own state-of-the art flour mill but decided instead to enter into talks with Greencore.

The flour industry has had difficulties for almost 20 years, suffering from structural over-capacity both here and in Britain.

The agreement between Greencore and IAWS should allow them "to build a real scale business", one source said, and to run the existing mills at full capacity, transforming the situation.