* Kirin unit Lion buys 9.99 pct stake in WCB
* WCB shares surge to record high before paring gains
* Lion, Bega, Murray Goulburn can block Saputo - analyst
(Recasts with Kirin buying stake, fresh comment)
SYDNEY, Oct 29 (Reuters) - Kirin Holdings Co Ltd bought a 10 percent stake in Warrnambool Cheese and Butter Factory Company Holdings Ltd (WCB) on Tuesday, in a move that could block a takeover of the Australian dairy company by Canada's Saputo Inc.
WCB has been the subject of a fierce bidding war, with Saputo, Canada's largest dairy producer, last week raising its bid to A$449 million ($430 million). That trumps separate approaches from WCB's two largest shareholders, Bega Cheese Ltd and Murray Goulburn Co-operative Co Ltd.
The purchase of the 9.99 percent stake by Kirin's Australian food and beverage unit Lion threatens to derail Saputo's bid, said Evan Lucas, a strategist at IG in Melbourne.
"It means that if they, Bega and Murray Goulburn banded together, they'd now have just shy of 50 percent so they will be able to block the bid from Saputo," he said.
Lion, which has brands including Berri juices and Pura milk as well as XXXX, Steinlager and Toohey's beer, said it had enjoyed a close relationship with WCB over many years and considered the stake buy "a continuation and strengthening of their relationship".
Australian dairy and farm assets are attracting increased interest as companies ramp up their exposure to Asia's growing appetite for milk, cheese and other food products.
Shares in WCB surged as much as 11 percent to a record high in heavy trade on Tuesday, fuelling expectations of further corporate activity.
WCB shares hit a peak of A$9.30 and but gave up much of their gains to close up 5.3 percent at A$8.80. Almost 6.2 million shares, more than 10 percent of the company, changed hands on Tuesday.
WCB earlier noted the heavy trade in a statement to the Australian Stock Exchange, but said it was not aware of the reason for the unusual activity. It added that it was in compliance with its disclosure obligations.
New Zealand dairy giant Fonterra Co-operative Group , which had also been seen as a potential bidder, said it had appointed Reunion Capital Partners to advise it on "the current corporate activity in the dairy sector". But it declined to comment on its possible involvement in a bid for WCB. ($1 = 1.0451 Australian dollars)
(Additional reporting by Lincoln Feast in SYDNEY and Naomi Tajitsu in WELLINGTON; Editing by Ryan Woo)