MG last week wrote to its shareholders confirming that it had approached WCB with an offer - believed to be about $4 a share - and if accepted would merge the two businesses and invite WCB suppliers to join an enlarged Co-operative.

WCB responded with a letter rejecting the MG offer as “incomplete and not capable of being put to shareholders” and detailed the premium its suppliers enjoy over MG prices and WCB’s on-going role as the “independent third force” ensuring greater competition for milk in southern Australia.

But that approach by WCB has drawn stinging criticism from financial analysts who said WCB’s arguments about prices paid to its milk suppliers had no place in defending a public company and may explain the lack of institutional investment in this company and its $20m loss in the year to the end of June 2009.

WCB suppliers and their related entities are understood to own about 40pc of WCB shares with the remainder held by investors.

Sydney Morning Herald business specialist David Symons said the vague outlook statements released by WCB “were not enough” and said what was required instead was a clearly articulated plan for growing maintainable profits, with earning of around $15 million needed to justify a share price above $4 in the medium term.

That is a long way from last year’s results when after tax profit fell from $24.5 million to negative $20m while gearing increased from 30pc to just over 51pc.

MG says it wants to create a strong, merged business that would be a 100pc owned farmer co-operative while maintaining the integrity of WCB’s strong regional branding and community commitment.

That entity, they say, would be better positioned to capatilise on future market opportunities with the scale and financial strength to continue investing in the business.

The enlarged Co-operative would add close to one billion litres of milk to the nearly three billion now processed by MG and would make up for volumes lost over the last decade in northern Victoria.

*Extract. Full report Stock & Land February 4.