Haverfordwest Cheese Ltd - owned by Dairy Crest - is set to be taken over by the UK's largest dairy farmers' co-operative, First Milk Limited.

The company has said that Dairy Crest employees working in Haverfordwest will simply have their contracts transferred to First Milk.

The transaction is expected to be completed by October 14 and will make First Milk the largest UK-based cheese supplier.

A spokesperson for Dairy Crest said: "From a company prospective we are pleased with the deal because it has generated a lot of money that we can put back into the company.

"What we were concerned about, was making sure that staff going to First Milk were protected legally and had assurances that they would remain employed. All the people who have been working with for us know their jobs are secure.

"We have also ensured that local farmers who have supplied us have been given a contract for another year until October 2007. That is unprecedented in the industry.

"Although a lot of people will be upset about the merger because they have been with us for along time, we have tried to do what is best for our staff."

Other Dairy Crest assets included in the £61.9m acquisition by First Milk include the creamery at Aspatria in Cumbria and the Maelor cheese-packing plant and processing plant near Wrexham.

Chief executive of First Milk, Peter Humphreys, said: "We are delighted to be able to announce this acquisition, which will make First Milk the largest UK-based cheese supplier.

"For dairy farmers to obtain the best possible price for their milk, farmer-owned businesses like First Milk must expand to achieve a critical mass along the dairy supply chain.

"Over the past 18 months, we have concentrated on the steps required to move away from being predominantly a milk brokerage operation, to create a dynamic, vertically integrated dairy business. With this acquisition, First Milk will make significant progress towards this goal.

"We are purchasing a well-run business, which we believe will have even better prospects for growth as a result of the ambition and focus of First Milk."