Dairy battle enters the 'silly zone': analyst

Saputo is risking its reputation as a "disciplined acquirer" as the battle for Warrnambool Cheese & Butter enters the "silly zone", according to Canadian analysts.

The North American dairy dynamo is locked in a three-way bid for WCB with Murray Goulburn - Australia's biggest dairy company - and NSW-based Bega Cheese.

On Friday, the Australian Takeovers Panel banned Saputo from buying WCB shares for at least two months after Murray Goulburn protested that the Montreal-based company had "misinformed" shareholders about the true value of its bid.

Despite the latest hurdle, Canadian analysts say the bidding war has become "political" and "dangerous".

Murray Goulburn increased its bid to $9.50 a share cash, trumping Saputo's $9.20 and fuelling speculation the price tag could rise close to $10 a share.

But fund manager John Stephenson, of First Asset Investment in Toronto, said Saputo investors were becoming jittery.

"I think it's starting to get to the silly zone where the deal dynamics are driving this," he said, adding anything above a 10¢ rise would be "a bit of a worry".

"They can probably make this work at $9.50 or maybe $9.60, but if they are going to chase this up to $10, I think that's crazy."

Saputo has limited growth opportunities in Canada and is planning to use WCB as its entry point into Australia and the lucrative Asia-Pacific market.

It has been patient, eyeing WCB for the past 12 years. It was only when Bega Cheese ignited the takeover battle in September that Saputo made its move, first with $7 a share offer, before the bidding war went into overdrive.

Mr Stephenson said while Saputo's expansion made sense, the competition from Murray Goulburn pitching itself as a farmer-owned alternative had become political "and that's a little dangerous".