The two largest dairy interests in the US are set to merge. Suiza Foods has confirmed it is to acquire Dean Foods in a deal worth US$2.5bn. Suiza will pay US$1.5bn in cash and stock while also assuming US$1bn of Dean Food's debt.

The new company, which is to be called Dean Foods but based in Suiza home city Dallas, will generate enormous sales of around US$10bn. This equates to over 30% of the milk consumed within the US, heralding a major change for the US$25bn market traditionally dominated by smaller, local companies.

"The merger is an important step in delivering on our ongoing growth strategy and positioning us for the future," said Gregg Engles, Suiza's chairman and CEO.

Engles will become chief executive officer of the merged group, while current Dean Foods chairman and CEO Howard Dean will become chairman of the new company. Dean Foods' shareholders will receive total compensation worth US$40.92 per share, consisting of US$21 in cash and 0.429 share of Suiza common stock.

The merger will bring together Suiza brands like Oak Farms, London's, Country Fresh and Sun Soy, together with Dean Foods bringing milk, ice cream, whipped cream and other specialty foods like pickles, puddings and sauces to the deal. As the companies show no substantial overlap in their product ranges, the deal should be completed by the third quarter of this year.