The merged Avonomore/Waterford group will start targeting acquisitions in the US and Britain within about 18 months, the chief executive of the new entity, Mr Pat O'Neill, said last night.

Meanwhile, Avonmore shares closed at their highest ever levels yesterday, while Waterford shares remained at their highest level of 177p. At the close of business Avonmore shares were worth 310p, up 3p on their previous close.

Mr O'Neill said Avonmore had a number of projects planned, but these would be put on hold until the new group was bedded down. This would be a major challenge, he said, and the process could take 12-18 months.

He told The Irish Times that the group would look for acquisitions in Britain "where there is a lot of talk about consolidation of the dairy industry" and in the US, where a very large market exists for the dairy and food ingredients sectors.

He said it would have taken Avonmore and Waterford at least five years each to attain the presence they will now have in the US if they had pursued separate strategies. He said the combined groups now have a very strong presence in the UK.

Mr O'Neill said the merger also gives the group a strong presence in Ireland. The Department of Enterprise and Employment will be considering the merger, a spokesman said last night. The Department could refer the matter to the Competition Authority who will then have 30 days to investigate it.

The authority could recommend the Minister accept or reject the merger, or accept the merger subject to certain conditions. The authority may look at the combined group's position in the Dublin market, where its share has been estimated at up to 70 per cent.

Mr O'Neill said he was confident the group would win merger approval. He said the Dublin milk market was deregulated four years ago and was sometimes likened to a "bear pit" where competition was concerned. He said it was a very competitive market with a number of players, including four large retail chains, who would ensure it remained competitive.

Mr O'Neill said it was hoped to complete the merger process by September 1st, but it could be delayed by a month if the matter is referred to the Competition Authority.

He said the first challenge "is to knit the businesses together and create a unitary state at management, farmer and employee level." He said the companies would now be assessing their markets and their presence in them.

Mr O'Neill said he was delighted at the high percentage of votes in favour of the merger. Asked about those who voted against the merger, especially the Kilmeaden Advisory Committee, he said they would be as welcome as shareholders as those who voted in favour.

"The only way we will convince them is by performance, by showing them that their concerns were unfounded," he said.

Mr O'Neill said he had been "a bit mystified" by the concerns raised over the possible dilution of farmer representation on the co-op boards. He said elaborate safeguards had been put in regarding any steps to dilute their representation.

Mr O'Neill admitted that the 3p per gallon premium, which the group has promised to pay farmers over the next three years, will be a great challenge. "We are not going to be able to do everything we wanted to do unless we live up to that challenge," he said.

The merger was welcomed by the Minister for Agriculture, Mr Walsh. He said the decision now cleared the way towards the creation of a food company with the strength and scale to become a real force in the international market.

The merger was also widely welcomed by farming groups. IFA president, Mr John Donnelly, said farmers had take the final decisive step towards transforming their businesses "into a first-class farmer-controlled operation which will give them better guarantees of income well into the 21st century".

The ICOS said the new entity would be a major force in the Irish, and world, dairy and food business. The ICMSA said it was "now in the hands of management to deliver the goods to farmers by way of milk prices, services and the best value in farm inputs".