John Teeling’s Irish Whiskey Company (IWC) is holding talks with a start-up company about leasing half of the Great Northern Brewery.
Twenty jobs will be created when the distillery goes into operation in July 2014.
It is hoped that the other company would create a similar number of jobs.
The distilling company will be employing skilled staff, but distilling is very different from brewing, so it is unclear if any of the remaining Diageo staff will be staying on should they consider it an option.
Louth Economic Forum chairman Padraic White has welcomed the announcement that IWC is to take over the brewery.
“As Forum chairman I warmly welcome the announcement that John Teeling is to operate the Great Northern Brewery as a distillery,” Mr White said.
“It is fantastic to see the future of one of Dundalk’s industrial landmarks secured and indicates John Teeling’s continued commitment to Louth.”
The Irish Whiskey Company is majority owned by the Teeling family: John Teeling and his sons Jack and Stephen. Former Cooley Distillery directors Jim Finn and David Hynes are also shareholders.