The merger of the dairy activities of French co-operatives Agrial and Eurial could be extended with a deal with a third co-op, Coralis.

The three parties are in talks over a transaction that would see Coralis absorbed in its entirety by Agrial as a preliminary move.

Agrial and Eurial announced in January they were looking to combine their dairy assets. France's competition authority has given its approval for the two co-ops to exchange shareholdings.

Coralis said it was entering into "exclusive negotiations" with the two parties "aimed at building a strong and sustainable co-operative grouping in western France".

Over 60% of Coralis's turnover of EUR350m is generated by dairy, the remainder in the collection of cereals and processing into animal feedstock. It produces UHT milk, butter and cream under the Agrilait brand.

Combined sales from Agrial and Eurial's dairy activities total just under EUR2bn, which span goat's cheeses, ultra-fresh dairy products, and cheese ingredients.