Two small El Dorado Hills companies that make nutrition products from rice bran are merging.

NutraCea is taking over next-door neighbor RiceX Co. in a stock deal valued at about $16 million, the two companies said Monday. The combined entity will be called NutraCea and will be run by officers of NutraCea.

The merger of the two publicly held companies completes a circle begun in 1989, when husband and wife Daniel and Patricia McPeak founded RiceX. The company was devoted to making products from rice bran - the outer layer between the hull and grain that's usually discarded.

In the late 1990s, Patricia McPeak left RiceX to create a new company, NutraCea, which would focus more on marketing products for human consumption. RiceX didn't want to get in that business. "It was too big of a gamble," Patricia McPeak said Monday.

The split was friendly; NutraCea bought raw product and even sublet office space from RiceX. But it became clear the companies needed to merge, McPeak said.

"In many areas the companies have been competing with one another," said McPeak, who will chair the new company.

As part of the deal, the combined company expects to obtain $2.5 million in new financing to pay off a short-term loan, said NutraCea President Brad Edson, who will be chief executive after the merger.

Edson said the merged company will be better able to forge partnerships with large companies that can extend NutraCea's marketing reach. "Small companies like ours don't always have the deepest pockets," he said.

NutraCea lost $24.2 million on sales of $1.2 million last year, but much of the loss was noncash expenses. RiceX lost $883,000 on revenue of $4 million last year.

NutraCea's shares fell 6 cents to 52 cents while RiceX was unchanged at 20 cents. Both trade over the counter.

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