Treasurer Joe Hockey may have unconditionally backed Saputo's $450 million takeover offer of Warrnambool Cheese & Butter but rival bidders believe they still have a fighting chance to control Australia's oldest listed milk processor.
Bega and Murray Goulburn, which own about 17 per cent of WCB each, are not planning on immediately raising their bids.
Bega adviser David Williams of Kidder Williams said Bega was still in the "box seat", despite having the lowest bid. Bega is offering $2 cash plus 1.2 Bega shares per WCB share, a bid worth about $7.23 based on Tuesday's close.
This compares with all cash offers of $8 a share from Saputo and $7.50 from Murray Goulburn.
But those offers are conditional. Saputo must acquire at least 50.1 per cent of WCB's stock - a tough task considering Bega, Murray Goulburn and Japanese group Kirin own about 44 per cent of the company - while Murray Goulburn's offer is subject to approval from the competition regulator.
"We will continue to monitor the situation. But we still think that Bega is still in the box seat because we are the only ones who can go unconditional," Mr Williams said.
A Murray Goulburn spokeswoman said the co-operative's position was unchanged. "MG believes that resolution of the future ownership of WCB will be a long process and that WCB shareholders should not act prematurely," she said.
WCB chairman Terry Richardson said Saputo was the best suitor and Mr Hockey's approval had "significantly progressed" its bid.
"We believe Saputo's offer provides more certainty for the future of WCB's operations and employees, including a strong future competitor for milk supply," he said.
Mr Hockey said the fate of WCB was ultimately up to its shareholders. But his message was clear.
"Australia is open for business and we welcome foreign investment when it is not contrary to the national interest," he said. "No conditions have been placed on this approval. This decision provides certainty in relation to Saputo's bid."
PAC Partners agribusiness analyst Paul Jensz said Saputo faced a tough task in not only winning the majority of WCB's shareholders but also getting a return on investment, saying the Canadian group could not generate synergies like Murray Goulburn or Bega, and that 70 per cent to 80 per cent of the company's cost base was the milk price. He said that was why some farmer shareholders were still undecided about which offer to support.
"It is a risk stock that's quite volatile. If it were part of a larger group and you removed that risk it would be worth about $5.60 [a share]," he said. "To get it up to $8, you'd have to start driving the business hard. A bit of that would be from margins before chasing the volume gain, which in the dairy industry can be fairly tricky."
However, Saputo chief executive and chairman Lino Saputo jnr said his company "has the strategic intent and the financial capacity to invest further in growing the Warrnambool business, expanding production and growing milk intake".
"Saputo's offer provides the opportunity to grow the industry locally as well as fast-track penetration into valuable export markets. Warrnambool will be at the heart of Saputo's Australian operations, while also creating a platform for growth into the Asia Pacific region."
Mr Hockey continues to deliberate on Archer Daniels Midland bid for GrainCorp. He will announce his decision on December 17.