New Zealand dairy co-op Fonterra has confirmed it has made an offer to buy Australia’s largest dairy processor Murray Goulburn. The move to acquire Murray Goulburn was confirmed on Monday by Fonterra Australia managing director Rene Dedoncker, who was speaking on Australian radio station ABC.

“The answer is yes we have put forward a proposal. It’s non-binding and indicative and at this point we are going to sit tight and give the MG board the respect they deserve to consider all proposals,” said Dedoncker.

Any tie-up between Murray Goulburn and Fonterra would create a dairy company processing close to half of all the milk produced in Australia, or roughly 5bn litres of milk.

Fonterra’s move for its Australian rival comes after Murray Goulburn chief executive Ari Mervis announced a strategic review of the entire business back in June, with Deutsche Bank appointed to act as the co-op’s financial advisor during the process.

By September, Deutsche Bank was calling for first round offers for Murray Goulburn, either in its entire or for certain assets of the business. After the deadline for offers expired on the 15th September, Murray Goulburn announced it has received a number of proposals from third parties, which ranged from offers for specific non-core assets to whole company transactions.

Although Fonterra has confirmed its offer this week, the early frontrunner for any deal with Murray Goulburn is thought to be Yili, the Chinese dairy giant. Speculation was rife in the last week that Yili had made an offer of $1.20 per share for Murray Goulburn, which would be almost double the value of shares in the co-op prior to the beginning of this review process.

Other dairy companies linked with a deal for Murray Goulburn include a2Milk, Saputo, Parmalat and the Danish dairy processor Arla foods.