Dairy Crest is planning to buy the doorstep delivery company Express Dairies in a £33m deal.
Consolidation is needed in the milk delivery industry
The firm has its own milk rounds business and says the combined group would have a 45% market share and two million customers.
Dairy Crest, known for its Clover, Vitalite and Utterly Butterly brands, will buy two dairies at Liverpool and Nottingham and 77 distribution depots.
Cost-savings were probable from the tie-up, Dairy Crest said.
Express Dairies, which is owned by Arla Foods, has 1,850 employees and distributes 390 million litres - 686 million pints - of milk annually.
The milk delivery business is in long-term decline - largely because of the low price of milk in supermarkets prompting customers to cancel their orders.
Dairy Crest chief executive Drummond Hall said this meant that merging the businesses made commercial sense.
"We will be able to prolong the life of these businesses by putting them together," he said.
Besides homes, Express also delivers to retailers, wholesalers, schools and restaurants.
Arla chief executive Tim Smith said: "In order for this sector to have a viable future, further consolidation of the industry was required."