AIM-listed Produce is the parent firm of Greenvale, one of the UK’s biggest potato suppliers.
In a stock market announcement, Produce said it was carrying out due diligence in relation to a potential takeover.
The Jersey Royal Company grows, grades, washes and packs new potatoes for UK retailers.
The company would be valued at £12m if the sale goes through.
The stock market statement by Produce said: “The company notes the recent press speculation regarding a potential transaction with the independently owned Jersey Royal Company and can confirm that the company has entered into Heads of Terms and has agreed a period of exclusivity in relation to a potential acquisition of the Jersey Royal Company.
“The Heads of Terms are non-binding and subject to due diligence which is progressing.
“The company will make a further announcement in due course if appropriate.”
Produce Investments Ltd was established in 2006 and listed on the AIM exchange in November 2010. It is based at Craigswalls near Chirnside.
For the year to the end of June 2013, it reported pre-tax profits of £7.6m on revenues of £206m.
The Jersey Royal Company grows 1,800 hectares of Jersey Royals each year and at peak season employs 500 people.
In 2012 28,600 tonnes of Jersey Royals worth a total of £30.8m were exported - down from 30,890 tonnes in 2011.
The fall was put down to poor weather early in the year.