Ready to eat meals company Northern Foods will merge with its Irish rival Greencore.

The company formed from the merger, to be named Essenta Foods, will supply one-third of all ready meals and sandwiches to British supermarkets which include Marks & Spencers, Morrisons, Tesco, Asda and Sainsbury.

Essenta Foods, which will be valued on the London Stock Exchange at close to £500m, is expected to generate sales of £1.7bn and provide employment to 16,000 people.

The new group will be headquartered in Dublin in an effort to boost Ireland's dismal economic outlook, as the country stands on the brink of insolvency.

According to Greencore's capital markets director Eoin Tonge, the deal demonstrated Ireland's viability as a business destination, given the country's corporate tax rate of 12 per cent, the lowest in the eurozone.

"Far from fleeing Ireland, this transaction shows companies are more than happy to do business here," said Tonge.

Most of the business though, will be based in Britain where the corporate tax rate is significantly higher at 28 per cent.

Greencore chief executive Patrick Coveney will head the new company.