The fight for Warrnambool Cheese & Butter could reach skyscraping heights, topping $10 a share, if the company's board endorses a fresh bid from Murray Goulburn.
Murray Goulburn, Australia's biggest dairy company, upped the stakes in the battle for WCB on Thursday, increasing its bid to $9.50 a share, valuing the target at $533 million.
On top of that, the milk co-operative is urging WCB's board to reconsider paying shareholders a special dividend, which would take its bid to $10.06.
WCB this week scrapped its plan to pay a 56¢ franking credit if the holding of its preferred bidder, Saputo, exceeded 50 per cent.
Murray Goulburn Gary Helou said: "Obviously they've dangled it ... so it must be there. But then they withdrew it. I don't understand why.
"They should engage with us because we would like to offer it. Surely it's in the interest of shareholders that it be discussed."
WCB's board said shareholders should take no action while it considers the revised offer.
The withdrawal of franking credits could derail Saputo's bid after Murray Goulburn protested to the Australian Takeovers Panel.
WCB chairman Terry Richardson said special dividends were no longer needed because Saputo would pay shareholders $9.20 if it reached a majority holding.
Mr Helou said that was effectively a reduction in the offer price and should be investigated.
A delay would be good for Murray Goulburn, considering its bid relies on approval from the Australian Competition Tribunal, which is expected to take up to six months to make a decision.
But Mr Helou said Murray Goulburn's revised bid should speak for itself. "We are approaching it from that context of combining it with what we have to create, a formidable, large Australian dairy food business, owned by Australians, by dairy farmers particularly.
"It's very, very critical for this industry to get a hold of. We are very serious about this."
Farmers and analysts have been concerned about Murray Goulburn's debt levels if its bid is successful. But Mr Helou said the fresh bid would add 0.2 points to its gearing, taking it to 57.2 per cent.
Mr Helou said on Tuesday that at $9 a share, the bidding war for WCB had hit "nosebleed" levels.
Murray Goulburn's bank funding remains unchanged at $350 million. Mr Helou said the co-operative had flexibility in its loans, which would help fund the difference from its previous bid of $9 a share.
Rivkin Securities director Shannon Rivkin said he expected Saputo to match the bid.
"The WCB board may simply reject the new Murray Goulburn offer, but it would be far easier for the board to reject if it could get Saputo to commit to the extra 30¢, which I think is a strong chance."