Several companies are competing for ownership of China's former dairy giant, Sanlu Group.

Sanlu ceased production in mid September after it was discovered it's baby formula was tainted with the chemical melamine.

The country's largest soft drink producer, Wahaha, announced its intention to purchase the troubled company last Saturday.

Well-known dairy suppliers such as Beijing-based Sanyuan Food and northeastern Heilongjiang's Wondersun Dairy, also want to buy Sanlu.

Wahaha said increasing demand for domestically produced milk was the major reason behind its move to purchase the company.

"We formerly used imported milk powder for our milk drinks. Because its current market price more than doubled from 2007 to US$5,700 per ton, we are considering building our own production line," said the group's head, Zong Houqing.

Zong pointed out Sanlu's equipment, materials, and skilled workers were what make the acquisition so desirable for Wahaha.

According to Zong, the company currently buys at least 150 thousand tons of milk powder every year.

"We could put Sanlu into operation again as soon as the purchase took place," Zong said.

Sanlu admitted on September 12 it had found melamine, a chemical banned in food, in some of its baby formula. Production was stopped the following day.

Sanyuan Food was believed to be the first company to make an offer to buy Sanlu. The company suspended it's trade in the stock market since the last trading day in September to do research on a merger scheme.

Some other large dairy producers were also reportedly to have shown interest in purchasing Sanlu, which had gained the reputation as "China's Famous Brand." Those companies include American-owned Feihe Dairy, southwestern Sichuan Province's New Hope Group, and Wondersun, among others.

All potential buyers, along with Wahaha, were not implicated in the country's tainted milk scandal.

Experts said there is little possibility for any company to take over Sanlu single-handedly. Sanlu has more than 700 million yuan (US$102.5 million) worth of debts, not to mention money it could owe in compensation claims for toxic milk victims.

"Under the current situation, one probable solution is for Sanlu to be jointly owned by several companies," said Wang Dingmian, member of the Dairy Association of China.

(Xinhua News Agency October 13, 2008)