Investors back Bega's move on Warrnambool

Bega Cheese shareholders have signalled they will not stand in the way of the company's takeover of Warrnambool Cheese and Butter, as its chairman signalled his intention to pursue the bid amid rival proposals.

Shareholders approved the lifting of a 10 per cent shareholder cap at Bega Cheese's annual meeting on Tuesday. The removal of the cap would allow investors who hold WCB stocks to be issued with shares beyond the current limit.

The constitutional change, which would be limited to takeovers or similar arrangements, signalled the NSW producer's continued push to merge with WCB, a western Victorian business.

WCB has seen its shares rise by almost 80 per cent after Bega and two other companies - Canadian dairy giant Saputo and the Murray Goulburn Co-operative - joined the bidding war for Australia's oldest dairy producer.

The share price rise meant Bega Cheese's share and cash bid valued WCB at $385 million as of Monday, just below Saputo's $391 million, Bega Cheese chairman Barry Irvin said.

WCB shares dipped to $8.10 on Tuesday, just below the record closing share price of $8.11 the day before. Bega Cheese shares closed down 1.96 per cent to $4.

"The Australian dairy industry needs to consolidate and needs to be in Australian hands," Mr Irvin told shareholders.

"Bega's offer continues in our mind to be a compelling one ..." Mr Irvin said Bega Cheese would retain WCB's brand name and operations, with the merger producing $7.5 million in savings.

The offer would see a combined market capitalisation of about $845 million, with revenues of more than $1.5 billion. The merged firm would harness the produce of 1000 dairy farmers in southern NSW, Victoria and South Australia, and a milk intake of 1.6 billion litres, he said.

"In anybody's language, that's a significant dairy company," Mr Irvin said, adding that Bega Cheese had always sought to be a significant global dairy business.

Mr Irvin said Bega Cheese reserved the right to revise its WCB offer, which was made on September 12 and which is open until November 28. But he added that Bega Cheese was not in a one-game scenario and was open to other opportunities.

PAC Partners agribusiness analyst Paul Jensz said Bega Cheese remained "pretty well-positioned" for a successful merger with WCB.

"They are probably the cleanest opportunity out there from an [ACCC] approval point of view. And they've left their powder dry a little bit on the price and if they need to lift the price, they'll consider it," Mr Jensz said. "They have a lot of other growth opportunities and are not boxed into the corner of having to do this deal."

Mr Jensz said Bega Cheese's proposal, which varies from the other two bidders in that it is not just a cash offer, could give WCB shareholders a chance to share in the medium and longer-term value of the merged firms.

Bega Cheese's offer consisted of 1.2 shares and $2 cash for each WCB share, which WCB directors rejected as being inadequate. WCB's directors had unanimously recommended Saputo's bid of $7 a share in early October, and have not yet responded to Murray Goulburn's $7.50 cash per share offer.