Latium Building Products, the window manufacturer owned by Sale Sharks chief Brian Kennedy, has been given provisionally cleared by the Competition Commission (CC) to merge with Epwin Group.
Cheltenham-based Epwin is also merging with Building Plastics Holdings and CET Glass Processors Holdings.
The companies supply a wide range of PVC building products and the CC said it had looked closely at the overlap between Epwin and Latium in the supply of PVC roofline and window-trim products.
The inquiry looked at the likely effect of the merger on both smaller customers, who buy the products over the counter, as well as larger customers such as house builders and contractors.
Announced at the start of 2012, the merger is expected to create a £275m turnover business with 2,500 staff. The new business, Epwin Holdings, is jointly owned by Kennedy and Epwin Group's chairman Jim Rawson.
Simon Polito, chairman of the Epwin/Latium Inquiry Group and CC deputy chairman, said: "Customers in this market are used to negotiating for the best price, so it is important that they continue to be able to do so after the merger.
"We found that it is relatively simple for customers to switch between suppliers and that competing suppliers have enough spare capacity to respond if large numbers of customers want to switch away from the merged company.
"Customers will therefore still have the option of going elsewhere when buying products and this continuing competition should prevent Epwin/Latium from using the merger as an opportunity to raise prices or reduce quality or choice in this market."
The commission is expected to publish its final report by 2 December 2012.