Nutrinnovator said on Friday that it is in advanced negotiations to acquire Provexis and expects to agree the transaction and fundraising around 24 March.
Last year the companies revealed they were discussing a possible joint venture to commercialise Cardioflow, the patented heart health ingredient developed by Provexis over the last four years, and expected to reach the market in a novel drink this summer.
A merger will allow the firms to make a bigger impact on the global functional food markets and bring together "the complementary skills of the respective management teams".
Nutrinnovator was set up in 2003 by a team of former executives from GlaxoSmithKline's nutritional division. Its first product, the Altu cereal bar, which is said to contain all the five food groups that nutritionists recommend we eat each day, is designed to offer a short-term revenue stream and provide a future platform for further product launches.
The product has however seen disappointing sales so far and suffered further setback recently with its sales agent Food Brokers being placed in administration.
The deal with Provexis will help it generate new business from products based on the CardioFlow technology, a patented tomato extract which has been shown in human trials to 'thin' the blood and benefit the circulation.
Provexis is also working on a novel product for the treatment of Crohn's disease, said to be a 'medium-term' project.
"The combined strategy will be based on scientifically-proven functional food products, underpinned by strong intellectual property positions, and delivered to market with a proven innovation capability," said Nutrinnovator in a statement to the stock exchange.
The company expects to extend distribution of the Altu bar in a current key multiple grocer account during March and add wholesale and convenience channels the following month.
However it warned that continued focus on financial controls will result in end of year cash balances being slightly behind expectations, in view of ongoing trading and operational difficulties.