South Australian food producer Beston has moved ahead with a plan to merge its technology subsidiary with anti-counterfeiter DataDot to track food products.

DataDot uses microdots, originally developed by the CSIRO, to watermark property and trace everything from documents and currency to pharmaceuticals, cars, wine and casino chips.

The merged company — which has now agreed on terms — would also protect against theft and counterfeiting of food products.

Under the deal, Beston Global Food’s (ASX:BFC) subsidiary Beston Technologies would merge with DataDot (ASX:DDT) to create a company with a combined value of $20 million.

“The merger of the two companies would create an Australian owned and integrated e-commerce traceability and anti-counterfeit software-as-a-service solution for both customers and producers across a wide range of industries including food, with a primary focus on protecting the integrity of the supply chain,” the two companies announced  on Friday.

Shares in DDT opened 33 per cent higher at 0.8c. BFC was up 4 per cent at 26c.

Beston (BFC) shares over the past month.
Beston (BFC) shares over the past month.

The move comes as Beston increasingly looks to supply its food and beverage products to China, where customers demand high levels of validation against counterfeiting.

Jack Ma, the founder of Chinese e-commerce giant Alibaba, last year called counterfeit goods the “cancer” of Alibaba – to be remedied by QR codes and verification technology on its products.

The rapidly growing global counterfeit market is thought to cost as much as $US 1 trillion.

“The ability to take the technology owned by both companies into a wide range of industries, in addition to food and beverage, would provide all shareholders with the opportunity to participate in the future growth and upside from taking an Australian anti-counterfeiting and traceability platform to global consumers and producers,” BFC chair Roger Sexton said.

As a part of the merger, DDT are set to undertake a capital raising of $12 to $15 million.

The move comes after BFC announced an increase in its dairy production capacity earlier this week, following an increase in their stake in Scorpio Meats.