The battle over Australia's dairy assets is set to reach fever pitch, with two local companies now potential takeover targets in a scrum that includes five dairy players - three among the world's largest.
New Zealand's Fonterra became the latest group to enter the field on Thursday, with the dairy giant snapping up a 6 per cent stake in Bega Cheese after the market closed.
The play, worth $75 million, brings the fight over assets full circle, with Bega responsible for the opening salvo in a bidding war that escalated over Warrnambool Cheese & Butter, a dairy processor on Victoria's western coast. Warrnambool remains in play, but must now compete for attention on a global stage with its NSW counterpart, Bega, a speculated target itself.
Canadian dairy major Saputo is currently the highest bidder for Warrnambool, with a cash offer of $8 a share.
That offer was complicated this week when Japanese brewer and dairy company Kirin bought a 10 per cent stake in the Victorian company through its Lion subsidiary.
PAC Partners agribusiness analyst Paul Jensz said Saputo could be eyeing Bega as an alternative foothold in the Australian milk export market.
"You'd think that a group like Saputo would be looking at their plan B, C and D now if Warrnambool doesn't come to pass," he said.
"At least half of Bega is quite similar to Warrnambool's export business, so that would be an alternative."
An adviser for Bega, David Williams, of Kidder Williams, played down the advance by Fonterra.
"There's a lot of interest in Bega. Is that speculation of a takeover? Maybe," he said.
"Do people think we're a good investment if we take over Warrnambool? I think so."
He said Fonterra had boosted the company's confidence in acquiring Warrnambool.
"It gives us more value for a takeover," he said.
Shares in Bega shot up 9.5 per cent on Friday, to close at $4.83. Any attempt at a takeover would require a change to Bega's constitution, which limits shareholders to a 10 per cent stake.
Mr Jensz said Fonterra's stake gave Bega more firepower to up its bid on Warrnambool, currently worth $7.74 a Warrnambool share. Murray Goulburn has offered $7.50 a share in cash.
"Fonterra have effectively said they want to align themselves with Bega - not Warrnambool - in a domestic expansion plan," he said.
"So that strengthens Bega's hand."
Shares in Warrnambool fell 3¢ to close at $8.27 on Friday.
Bega said it would hold a board meeting next week to discuss its next move.
Late on Thursday, Fonterra picked up 9.3 million shares for $4.95 a share for a total cost of $46 million. The NZ company is believed to be looking for as much as a 10 per cent stake in Bega.
Fonterra chief executive Theo Spierings said Australia was an important market for New Zealand's biggest company. It was committed to growing an already strong presence across the Tasman, he said.
"There has recently been a lot of consolidation activity in the Australian dairy industry," Mr Spierings said.
"It is important that Fonterra participates, and we have confidence in Bega and the strategy it is pursuing."