Warrnambool Cheese and Butter (WCB) has urged its shareholders to reject a $370 million takeover proposal from rival Bega Cheese, saying the offer is inferior to an offer from Canadian dairy giant Saputo.
Bega last week said it intended to put its takeover offer to WCB shareholders, despite saying it would not lift its offer to match Saputo's $390 million cash proposal.
It said it believed some WCB shareholders would prefer the company remain in Australian hands.
But the WCB board on Wednesday urged its shareholders to reject the deal and ignore all documentation sent to them by Bega.
They pointed out that a recent independent audit found Bega's offer was neither "fair nor reasonable" to WCB shareholders.
"The Saputo offer ... is superior to Bega's offer," chairman Terry Richardson said in a letter to shareholders.
Saputo has put forward a $7 a share takeover offer, while Bega's proposal, which has previously been rejected by the board, would see WCB shareholders receive 1.2 Bega shares plus $2 cash.
Bega already holds almost 18 per cent of WCB's shares.
Bega's offer closes on November 28.WCB shares dropped one cent to $7.21 on Wednesday, and Bega shares lost two cents to $3.83.