An Australian company has launched legal action over its failed bid to takeover Tasmanian dairy giant Van Diemen's Land Company (VDL).

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TasFoods, formerly OnCard International, entered into a sales agreement to buy VDL from the New Zealand-based New Plymouth District Council (NPDC) earlier this month.

But late last week NPDC announced it was going back on the agreement in favour of a new bid from an unnamed foreign private company.

The identity of the buyer is subject to a full confidentiality agreement and will not be disclosed until the deal is finalised.

The new agreement is conditional upon Foreign Investment Review Board approval.

NPDC said the offer from the private company was "commercially superior" to the bid from TasFoods.

But TasFoods said the new agreement was less valuable.

In a statement on the ASX, TasFoods said the price agreed in the deal struck with the foreign buyer was less than its bid, which was in excess of $280 million.

TasFoods chairman Rob Woolley said the company had been working diligently and in good faith to complete the acquisition.

"It's a large transaction... particularly when our company was not a very big company," he said. Listen Duration: 4 minutes 8 seconds 4 m 8 s Listen Space to play or pause, M to mute, left and right arrows to seek, up and down arrows for volume. Chair of TasFoods Rob Woolley says legal action has been taken over the sale of VDL ( Tony Briscoe ) Download 1.9 MB

"We were satisfied that we had the equity to enable us to complete the purchase."

Mr Woolley said he was not aware NPDC was negotiating with other companies.

"There's a lot of moving parts with this whole deal and as it turns out, there were one or two moving parts that we weren't aware of," he said.

"We felt very misled at the end because whilst we didn't have a complete exclusivity arrangement with the vendor, we were led to understand they were dealing solely with us.

"There was a mutual understanding of our requirements and they were very clear that they were meeting those until right in the end.

"We feel that we haven't been treated fairly and we feel that we made a very fair and a very clean offer."

TasFoods still hopeful of acquiring VDL

Mr Woolley said TasFoods had obtained an injunction from the Supreme Court in Victoria to stop the sales agreement from being terminated before a hearing on Wednesday.

"It's to do with how they were dealing with us," he said.

"The issues are really with the New Zealand vendor... and the New Plymouth District Council... they're detailed legal arguments.

"[The outcome is] very difficult to predict at this stage.

"We'll hope that that interim injunction is confirmed and we'll work towards that."

Mr Woolley said he hoped a takeover was still possible.

"We'd really like to acquire VDL," he said.

"We wouldn't have chased it so hard.

"I think for us to say anything other than that is too premature."

Existing workers jobs safe: VDL

Meanwhile VDL said the new buyer had confirmed all existing staff would be retained on terms "no less beneficial" than their current conditions.

New Plymouth District Council's investment arm Taranaki Investment Management Limited has owned VDL for the past seven years.

CEO Mike Trousselot said it was an extremely beneficial investment and the sale would be a positive outcome for VDL and Tasmania.

"We have taken a lot of pride in the continuous improvement of VDL," he said.

"Over the seven years of our ownership, milk production has gone up 150 per cent , the quality of livestock and pasture has been improved, we have great staff and management and farm values have increased accordingly.

"The business generates reliable profitability, has increased employment, and downstream economic benefits to Tasmania.

"It has been a good investment for NPDC but is now overweight in its investment portfolio, and so has been put to the market."

VDL chief executive David Beca said the new buyer would offer jobs to existing employees. Listen Duration: 3 minutes 1 second 3 m 1 s Listen Space to play or pause, M to mute, left and right arrows to seek, up and down arrows for volume. VDL CEO David Beca talks about the change in ownership of the company ( Jane Ryan ) Download 1.4 MB

"While the sales and purchase agreement is subject to Foreign Investment Review Board approval, this agreement provides continued certainty to all our employees, customers and suppliers," he said.

"The new buyer has confirmed it will make offers of employment to all existing employees of the business on terms no less beneficial to them than their existing terms of employment and that all existing employment benefits will be retained."

The company milks 17,890 cows over 7,062 hectares and saw record production last year.

Farmers' group unfazed by new buyer

Tasmanian Farmers and Graziers Association (TFGA) dairy chairman Andrew Lester said he was not concerned VDL would fall back into foreign hands.

"It's a commercial decision so the TFGA doesn't really have a position on who buys the property," he said.

"What we're more interested in is whether whoever is successful in the bidding is able to have the ability to invest capital in that business and grow the industry for our state, and have the ability to look after animal welfare and human welfare.

"History shows that any investment into the industry has been good, whether it's local or overseas investment is not a huge concern of ours."

He said the TFGA would back the strongest investor.