Dairy co-op Milk Marque has bought bakery supplier Community Foods, which supplies ingredients such as seeds and is one of the leading companies in the organic and health food sector.
The deal will mean that 12,000 dairy farmers and former dairy farmers in the UK will become shareholders.
"Community Foods represents an excellent investment for Milk Marque shareholders," said Milk Marque chairman Roger Evans. "It is growing rapidly, operating profitably in an attractive sector, has the scale Milk Marque is seeking, and a background and ethos that fits well with our own co-operative origins."
For the 12 month to 31 March 2006, Community Foods made a pre-tax profit of £3.4m on turnover of £54.4m.