Takeover target Warrnambool Cheese and Butter Factory (WCB) says suitor Murray Goulburn is unlikely to overcome hurdles obstructing its bid.
Murray Goulburn's offer is subject to no objection by the Australian Competition and Consumer Commission (ACCC) or the granting of authorisation by the Australian Competition Tribunal.
The company has decided not to seek ACCC approval and instead request authorisation from the Competition Tribunal on the grounds that the net public benefit of its acquisition of WCB would outweigh any likely anti-competitive effects.
"Your directors consider that the outcome of the Competition Tribunal's assessment of the application is uncertain," WCB said in its target's statement, released on Tuesday, in respect of the Murray Goulburn offer.
WCB pointed to concerns raised by the ACCC when Murray Goulburn proposed to take over WCB in 2010, saying the likely anti-competitive effects remained broadly similar.
Furthermore, the public benefits asserted by Murray Goulburn were predicated on Murray Goulburn acquiring 100 per cent of WCB, which WCB said was unlikely.
Therefore, it was uncertain whether Murray Goulburn could satisfy the net public benefit test.
WCB said Murray Goulburn had not indicated why public benefits could not be achieved under different industry structures, including the status quo or an alternative bidder achieving control of WCB.
Canadian dairy giant Saputo has also made a takeover bid for WCB, which the WCB board favours.
WCB said it was unable to assess whether cost savings that might be made from a combination of WCB and Murray Goulburn were achievable.
Plus, any achievable cost savings might be offset by the increased debt that Murray Goulburn would incur to fund its offer.
WCB said that even if Murray Goulburn obtained Tribunal authorisation, its offer could only proceed if Murray Goulburn satisfied a 50 per cent minimum acceptance condition, which would be difficult.
Murray Goulburn has a 17.7 per cent stake in WCB, Bega Cheese has 18.8 per cent, Saputo has 17.9 per cent, and Lion has about 10 per cent.
Saputo is offering an unconditional $9.00 per Warrnambool share, but that price can increase to as much as $9.60 if Saputo attains various share thresholds in WCB at and above 50 per cent.
Murray Goulburn's bid of $9.50 is conditional upon it obtaining more than 50 per cent of WCB shares - a condition, WCB says, that could not be waived without the consent of Murray Goulburn's financiers.
WCB said that if WCB shareholders accepted the final Saputo offer and there was a stalemate - that is, neither Saputo nor Murray Goulburn acquire a stake in WCB greater than 50 per cent - WCB shareholders would still receive the minimum $9.00 from Saputo.
Murray Goulburn on Tuesday said it had a compelling case for Competition Tribunal authorisation and urged WCB shareholders to wait for the outcome of the Tribunal process.