Wiseman signed a supply deal with Sainsbury's in August

The firm said the price of any deal is expected to be 250 pence per share, a 10% premium on Friday's closing price.

Chairman Alan Wiseman said the deal would "strengthen the relationship that exists between the two organisations".

Wiseman delivers milk to supermarket giant Tesco and in August signed a long-term supply deal with Sainsbury's.

The Sainsbury's contract helped to offset the loss in May of a supply deal with Asda worth �70m.

The First Milk co-operative includes more than 4,000 farmers and produces 2.5 billion litres of milk a year.

It was set up to get a fairer deal for farmers who said they were being squeezed by supermarkets.