Fonterra refuted reports this week that claimed it knocked back higher bids for the site from dairy competitors.

It told The Standard that animal nutrition company ProviCo was the only party to make a formal offer.

A Fonterra spokeswoman said some parties completed "preliminary due diligence" in the sale process but "dropped out early".

She said there were "no restrictions" on the sale and the buyer could use the site "for what they want".

ProviCo owner Andrew Paterson said his plans were to expand the company's milk-replacement products for animals.

"We will manufacture all our domestic calf milk replacers and dairy ingredients at Dennington and we will store and distribute them from there," Mr Paterson said.

So what exactly does that mean for the next chapter of the century-old site?

ProviCo makes milk replacer at its Laverton factory for the rearing of infant animals including cows, horses, alpacas, sheep, goats and pigs.

To make that product, Mr Paterson explained the company used "a range of ingredients that don't require farm-gate milk".

Instead it uses a range of milk powders in a dry-blended process to create its products.

Mr Paterson said the acquisition of Dennington would enable ProviCo to increase its ingredients to include liquids and byproducts used in the dairy manufacturing process.

"If you've got a cheese manufacturer in an area and they don't have access to a dryer then those byproduct ingredients are simply disposed of and their value lost," Mr Paterson said.

"Manufacturers will be able to work with ProviCo to better manage these streams."

The factory will initially employ up to 30 local workers and Mr Paterson hoped to re-employ some who lost jobs in the milk factory's closure last year.

"Those skills are as valuable when they were making human nutrition products as they are to our own products," he said.

"Initially we want skilled workers, but we will be looking at training programs in the longer-term."

ProviCo started in 2003 as a Murray Goulburn-Cargill joint venture that Mr Paterson has manufactured for about a decade. His group Australian Dairy Goods bought ProviCo in 2018 after Murray Goulburn was taken over by Saputo.

Mr Paterson said ProviCo's expansion to the south-west would double the company's capacity and offer it new ways to make its product.

He said the site's spray dryer, located in the factory's eight-storey tower, would make a wet-blend formula and dairy ingredients.

"What this plant gives us is the ability to both continue on with dry blending as in Laverton, and also begin with wet blending," Mr Paterson said.

He said being in the south-west would bring the company closer to dairy manufacturers and farmers. "Being in the middle of dairy land helps," he said.

Mr Paterson said reports he bought the Dennington factory for less than $10 million were "inaccurate" but would not reveal the sale price. "The price we paid is not as relevant as the value it will bring to industry and farmers," he said.

Fonterra also declined to reveal the sale price.

Fonterra blamed the factory's shut down in November on a declining milk pool.

But Mr Paterson claims his product could help increase quantities of milk available for farmers to sell to processors.

"If farmers use our product they don't need to feed calves with their milk. They have an extra quantity of milk they can sell to their processors," he said. "A 20 kilogram bag of milk replacer is 160 litres of milk available for processing. It's trying to make more milk available."

Warrnambool civic leaders and residents welcomed the sale this week and Mr Paterson said he was encouraged by "overwhelming support" from industry.

"The processors themselves are saying it's a good thing and that's encouragement for us."

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