Directors of Warrnambool Cheese and Butter are encouraging shareholders to reject Bega's $319 million bid.
In a statement issued today, WCB says Bega's bid of 1.2 Bega shares and $2 cash for each WCB share is "inadequate and does not reflect fair value for WCB shares."
According to The Land, WCB feels that Bega's bid is highly opportunistic and doesn't reflect the value of recent improvements made to WCB's business.
The offer could also "result in a potential tax liability for shareholders", directors argue.
Earlier this month, after making its $319 million offer, Bega Cheese executive chairman, BArry Irvin, vowed not to make any immediate changes to how the company pays suppliers if the offer is accepted.
"We absolutely recognise that we can't just come in and change the milk price, disrupt the whole traditional pay system," he said.