Bega Cheese's takeover play for Warrnambool Cheese and Butter Factory has been given a boost, with the competition regulator approving the bid.
Australian Competition and Consumer Commission chairman Rod Sims said there was limited overlap between Bega and Warrnambool in relation to the acquisition of raw milk in the dairy region of southwest Victoria and areas of northern Victoria.
"The ACCC concluded that a merged Bega and Warrnambool Cheese and Butter would continue to be constrained by other dairy manufacturers that they compete more closely with in the acquisition of raw milk, including Murray Goulburn and Fonterra," Mr Sims said.
"Murray Goulburn and Fonterra are also the largest suppliers of each of the processed dairy products supplied by Bega and Warrnambool Cheese and Butter, and would be likely to competitively constrain the parties, in the event that they merge, in the future."
Bega has offered $2 plus 1.2 of its own shares for each Warrnambool share.
Warrnambool's board has recommended to shareholders a higher bid by Canada's Saputo, which is offering $8.00 per Warrnambool share, valuing the company at $449 million.
The Murray-Goulburn co-operative is also targeting Warrnambool.
Earlier this week, Japanese dairy and beverage company Lion bought a 9.99 per cent stake in Warrnambool, with which it has a working relationship.
Saputo chief executive Lino Saputo Jr offered no comment on the ACCC's ruling on the Bega bid.
"We have put forward a compelling all cash $8.00 per share offer to all Warrnambool shareholders, which the WCB board has unanimously recommended to its shareholders, in the absence of a superior proposal.
"Saputo has made its intentions clear in terms of investing in and growing the WCB business, expanding capacity and growing milk intake.
"We also have the financial capacity to deliver this."Warrnambool shares dropped six cents to $8.30 while Bega's shares added two cents to $4.41.