Dairy co-operative Murray Goulburn has stormed ahead in the hotly contested bidding war for Warrnambool Cheese & Butter after issuing a hefty sweetener that values the processor at $505 million.
Although the $9-a-share offer is $1 above a rival bid by Canadian outfit Saputo, Murray Goulburn managing director Gary Helou is letting others decide if this is the decisive blow.
"If it proves to be the knock-out blow, may it be. That's not the objective," he said "The objective is that we are doing something in the interests of our shareholders and the Warrnambool shareholders, and particularly supplier farmers."
The revised offer came just a day after Treasurer Joe Hockey gave Saputo foreign investment approval on Tuesday. It eclipses Bega Cheese's cash and share offer, which is worth about $7.56 a share based on current prices.
Much of the tension has been between Saputo and Murray Goulburn. The Canadian firm last month increased its offer to $8 after Murray Goulburn entered the bidding war with $7.50. Both offers are all cash.
WCB's board has supported Saputo's offer but in a statement, it urged shareholders to "take no action" as it considered its options.
Murray Goulburn's bid is subject to approval from the competition regulator, which is expected to take three months.
Although WCB's board has previously said there was uncertainty around Murray Goulburn's bid, given the lengthy regulatory process, chief executive David Lord told BusinessDay last Friday that the board was "seriously considering" its $7.50 cash offer before Saputo increased its bid.
RBS Morgans analyst Belinda Moore said she did not expect Saputo to give up the chase, and neither did the market. WCB shares soared past $9 to close at $9.06. Initially shares traded as high as $9.20 as some investors bet on yet another higher offer.
Still at current prices, doubts remain over the ability of the Canadian company to secure a return on its investment, considering that it doesn't have a presence in Australia and would not be able to generate the synergies available to Murray Goulburn or Bega.
But assets of WCB's calibre are scarce, and all players have highlighted its export capability and potential to capitalise on the Asian agriculture boom.
Even if Bega pulls out, it stands to get a $92.4 million cash windfall for its 18.3 per cent WCB holding.
In addition, if Murray Goulburn receives an acceptance level of over 90 per cent, it will receive 56¢ a share of franking credits. Bega can use these funds to pay down debt, fund growth opportunities or return it to shareholders.
Shares in Bega leapt more than 6.4 per cent on Wednesday to $4.64.