Canadian diary giant Saputo has increased its offer for Warrnambool Cheese and Butter to $449 million, insisting its takeover of the local company would not reduce competition.
The local dairy company's board has supported the new offer, but rival bidder Murray Goulburn said it is committed to pursuing a takeover.
Saputo is now offering Warrnambool shareholders $8 a share, more than Murray Goulburn's offer of $7.50 and Bega's offer of $2 plus 1.2 of its shares.
The Canadian dairy firm originally offered $7 per share.
Saputo chief executive Lino Saputo Jr said his company planned to maintain Warrnambool's current facilities and increase its output.
"We know how important competition is for milk producers," Mr Saputo said.
"Saputo does not currently have a business in Australia, so Saputo's arrival in Australia will not reduce competition.
"Instead, we will ensure WCB is well financed and remains a vibrant competitor.
"Saputo plans to continue to operate Warrnambool's facilities at Allansford and Mil Lel, and will look at investing to expand Warrnambool's operations to increase manufacturing capacity.
"In turn this should provide suppliers with more opportunities (to) sell their milk."
Warrnambool's board has urged shareholders to reject Murray Goulburn's bid, and an offer from Bega Cheese.
"In addition to the attractive price offered to shareholders, the WCB board takes comfort in Saputo's assurances to suppliers and employees, as well as its intentions to invest in WCB's assets and pay a leading competitive milk price," chairman Terry Richardson said.
But Murray Goulburn said the fight for Warrnambool would be a long one.
"(Murray Goulburn) believes that resolution of the future ownership of WCB will be a long process and that WCB shareholders should not act prematurely in relation to giving up control of their shareholdings," it said.
"(Murray Goulburn) remains committed to acquiring WCB and to satisfying all conditions associated with its offer as quickly as possible."
Saputo said its offer represented greater certainty for Warrnambool shareholders because, unlike the Murray Goulburn and Bega offers, it is not subject to approval from the Australian Competition and Consumer Commission.
However, the Saputo deal would be subject to approval from the Foreign Investment Review Board.
Both Saputo and Murray Goulburn have said a takeover of Warrnambool would help them to take advantage of growing demand in Asia for dairy products.
Warrnambool shares gained 27 cents, or 3.3 per cent, to $8.42, continuing its rise from $4.50 just six weeks ago.
Murray Goulburn and Bega are Warrnambool's biggest shareholders, with each owning more than 17 per cent of the company.
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