The deal, confirmed this morning after months of all parties flatly denying or refusing to comment on the speculation, will create a massive global player with a turnover of around 1.5bn ($2.6bn).

Flint Ink chief executive Dave Frescoln will assume the same role in the new group, while Xsys chief executive Peter Koivula becomes vice chairman of the new firm.

Venture capital firm CVC is gradually becoming a major force in the print and consumables industry. It formed Xsys from the acquisition and merger of BASF Printing Systems and ANI Printing Inks last autumn. Its other investements include packaging groups Britton and Kappa, and containerboard manufacturer AssiDomn

CVC has also been linked in press reports with a possible bid for the Daily Mirror.

Managing director Dr Christian Wildmoser said: "By building the second largest ink manufacturer in the world, Flint Ink, XSYS and CVC are creating a stronger competitor better placed to serve customers in a fragmented market, where size is of critical importance for the success of the business. We are continuing to globalise the businesses following the needs of our customers in the printing industry. The transaction will significantly strengthen the combined group's positions in each of its core inks segments."

Charles Murray, corporate vice president and UK group managing director at Sun Chemical, the world's largest ink maker, described the deal as "a reflection of the lack of suitable margins in the industry". He said: "The only way to survive is through consolidation. It's sad that it's not the ink companies driving it, it's the venture capitalists. It underlines and reflects the inadequate returns in the market."

Story by Josh Brooks