Nissin Food Products has pulled out of a deal to merge its frozen foods business with a subsidiary of Japan Tobacco after contaminated frozen dumplings sold by JT made at least 10 people ill and caused a nationwide panic.

The merger would have created Japan’s biggest frozen foods company with annual sales of Y260bn ($2.4bn). Nissin’s shares fell 8 per cent after it announced on Wednesday that the deal would be scrapped, while JT’s already battered stock ended down 1 per cent.