Australian dairy firm National Foods has confirmed that it is pursuing discussions with compatriot food company SPC Ardmona regarding a possible merger of the two companies.

National Foods said discussions at this stage are preliminary and non-binding and no formal proposal has been made to the board of SPC Ardmona.

"If this proposal proceeds, it would provide an opportunity to develop a major Australian food company that would deliver growth for shareholders, growers and the Goulburn Valley," National Foods said.

SPC Ardmona said that in assessing any proposal, the company's chairman, David Meiklejohn, had indicated that the board will consider the price and terms offered to SPC Ardmona shareholders, the proposed integration plan and any other relevant information.

"The board will also ensure that any proposal adequately addresses the impact on all stakeholders in SPC Ardmona, including growers and employees. The board will keep SPC Ardmona shareholders informed of any further material developments," SPC Ardmona said.