Federal Treasurer Joe Hockey faces another foreign ownership test after the board of Australia's oldest listed milk processor unanimously backed a $390 million takeover bid from a Canadian dairy company.
Saputo, which has courted Warrnambool Cheese and Butter for much of the past decade, has pounced on the company, with an all cash offer of $7 a share.
It comes two weeks after WCB's board urged shareholders to reject a takeover offer from NSW-based Bega Cheese, which valued the company at about $319 million.
But Bega believes the Saputo bid has only a "slim chance" of being approved by at least 50.1 per cent of WCB shareholders, considering it and Murray Goulburn own more than 36 per cent of the company.
The Saputo offer is also subject to approval by the Foreign Investment Review Board, which has been considering a $3 billion takeover of east coast grains handler GrainCorp from US agribusiness company Archer Daniel Midland.
The GrainCorp proposal has created headaches for Mr Hockey, who has delayed making a decision until December. Before the election, Nationals leader and now Deputy Prime Minister Warren Truss attacked the ADM takeover, questioning whether it was in the national interest.
NSW farmers have also lobbied extensively against the proposal.
Despite this, WCB chief executive David Lord said he was "comfortable" with Saputo's offer. He said foreign investment during the past 50 years had strengthened Australia's dairy industry.
"I refer to Kraft, Nestle, Fonterra - three big international investors who came to this country and invested heavily in the dairy industry and grew it for the benefit of all the current participants," he said.
"[The Saputo] deal provides compelling value for shareholders ... I think that's indisputable. It also provides security and opportunity for WCB's key stakeholders, its suppliers, employees and the wider community."
Investors warmed to the bid, with WCB shares surging 11.15 per cent to $7.18.
RBS Morgans analyst Belinda Morgan said the offer was "very attractive", considering that if Saputo obtains 50.1 per cent of the company, WCB shareholders would be paid an additional fully franked dividend of 46¢ a share, which could rise to 85¢ if Saputo obtained 90 per cent.
Ms Morgan said the proposal reflected the strategic nature of WCB's assets and it would be interesting to see if Bega beats the offer.
But Bega adviser David Williams, of Kidder Williams, believes the NSW company has most WCB shareholders on its side, highlighting that Saputo must obtain at least 50.1 per cent of the company.
"We think that condition, when between Murray Goulburn and ourselves, we've got about 36 per cent, is pretty unlikely," Mr Williams said.
"Because of that our bid will still stay on the table and we entirely expect to get some acceptances to our the bid the way it is."
Murray Goulburn did not return calls from Fairfax Media.
Saputo approached WCB about a takeover in October 2009 at an undisclosed price, which was below $4 a share.
Two months later, Saputo increased its offer to $4 and a few days later WCB rival Murray Goulburn arrived with a $3.80 a share cash takeover proposal of its own. But WCB's board said both offers were too cheap.
Saputo CEO and vice-chairman Lino Saputo jnr said that the company had been eyeing WCB for the past 12 years, recognising that its acquisition was key to its growth plans for Asia and the Pacific region.
He said there would be no rationalisation of staff, including management, or redeployment of assets if the offer was approved, saying WCB would be its only presence in Australia and he didn't plan to run it from Montreal as a satellite office.
"We would see Warrnambool as a platform for growth in Australia and through which to expand into the Asia-Pacific region, working with Warrnambool's management," Mr Saputo said.
Saputo has already applied to the Foreign Investment Review Board and hopes to finalise the deal by early December.