Bega Cheese has made a $319 million play for fellow dairy producer Warrnambool Cheese and Butter that could create one of Australia’s largest listed food companies.

But the 125-year-old Victorian diary producer has urged its shareholders to hold off on accepting Bega Cheese’s offer for now.

Bega, which has operations in the NSW south coast town and Victoria, already owns 18 per cent of Warrnambool Cheese.

It says a merger of the historic country cheese makers would create one of Australia’s largest listed food companies, worth $650 million.

A combined company would generate $1.5 billion in annual global revenue, employ 2,000 people in regional Australia, and make 353,000 tonnes of dairy products each year, Bega executive chairman Barry Irvin said.

“Customers, dairy farmer suppliers and employees will also benefit from being associated with a larger, more diversified organisation, an enhanced market position and a scale that is globally relevant,” he said.

Warrnambool Cheese chief executive David Lord has urged shareholders to delay any decision on accepting Bega’s offer of $2 cash and 1.2 Bega shares for every individual share.

Warrnambool Cheese’s board will meet soon to consider Bega’s offer, which must stand for a month, and will then make a recommendation to shareholders.

Bega’s offer values each Warrnambool Cheese share at $5.78, a 28 per cent premium to their last listed value before the offer was made public on Thursday.

Mr Irvin said Warrnambool Cheese’s identity and brands would be preserved if the takeover proceeds.

Combining the two companies could save up $7.5 million in costs each year, he said.

Warrnambool Cheese shares surged on news of Bega’s offer adding $1.26, or 28 per cent, to $5.77 by 1515 AEST.

Bega shares also rose, adding 17 cents, or 5.4 per cent, to $3.32.