BEGA Cheese executive chairman Barry Irvin says he will not just go with the highest price when it comes to selling his company's 18.8 per cent stake in Warrnambool Cheese & Butter (WCB).
Mr Irvin said on Thursday that the Bega board is yet to meet to discuss its stake as the Friday deadline looms.
"It's an important date tomorrow should Saputo close, but we are thinking about a number of options. We've had a range of inquiries. The board can get together at short notice," he said.
"We will think about the broader industry good and the position of Bega, but we've also got responsibilities to do the right thing by our shareholders."
Canadian dairy giant Saputo, which emerged as the single-biggest shareholder in WCB on Thursday with 20.1 per cent, is locked in a fierce $500 million-plus takeover battle with Victorian farmer co-operative Murray Goulburn for control of WCB.
NSW-based Bega Cheese kicked off the WCB bidding war in September with its offer of $2 cash and 1.2 Bega shares, but pulled out of the race last month when the bidding got too hot and is now the potential kingmaker in the deal.
Saputo is trying to pressure shareholders into accepting its $9-a-share cash bid, with the prospect of walking away.
Saputo's offer is set to close at 7pm on Friday, but it is thought the company will likely extend the offer.
According to substantial filings published on Thursday, Saputo is now the biggest shareholder in WCB, jumping to 20.1 per cent from 17.9 per cent.
Murray Goulburn, which has offered $9.50 a share in cash, owns 17.7 per cent of WCB but its offer remains conditional on getting more than 50 per cent of the company and receiving merger approval from the Australian Competition Tribunal.
Murray Goulburn must convince the tribunal that the public benefits it claims the merger will generate, such as increased exports and higher milk payments to farmers, outweigh anti-competitive concerns.
In his brief submission to the tribunal, Mr Irvin came out on Murray Goulburn's side by disagreeing with the competition regulator's narrow definition of the milk market.
"We note the Australian Competition and Consumer Commission has previously identified consolidation between raw milk procurers operating in southwest Victoria as having the potential to substantially lessen competition," Mr Irvin said in the submission.
"Bega Cheese does not believe there is a separate southwest Victorian market for milk procurement. Even if there is a separate southwest Victorian market, Bega Cheese believes there remains significant competition in that region, even with a merger of MG and WCB."Consolidation best for Australian dairy
Saputo is the world's 10th-biggest dairy processor and dwarfs Bega. The Montreal-based company has no existing operations in Australia and sources say there is competitive logic in locking Saputo out of the market.
Mr Irvin told Fairfax Media on Thursday that he believes consolidation is the best thing for the Australian dairy industry, but that does not necessarily mean Bega will not sell to Saputo.
"You can't control competition or control the environment. In the Australian dairy industry, I can see the benefit of consolidation, but if a new competitor enters the market, we've shown we are able to deal with competition very well," he said.
"We'll make our decision based on Bega Cheese strategy and the right thing for suppliers and shareholders."
Based on WCB's $9.15 close price on Thursday, Bega's stake is worth almost $100 million. Excluding tax considerations, Bega stands to make a profit of more than $60 million if it sells to Saputo at $9 a share.
Japanese-owned Lion's 10 per cent WCB holding is also being pursued by Saputo and Murray Goulburn, but the company has indicated it wants to move when the winning bidder is clear to leverage its negotiating power to full effect. Lion is expected to be the last piece to move in the deal.
Lion's Australian dairy operations have struggled and the company took the stake to protect its significant cheese supply contracts with WCB.
Mr Irvin said Bega is not looking to move in concert with Lion and will reach a separate decision about its stake.