Perth, Oct 19 - New Zealand's Fonterra Cooperative Group Ltd., the world's biggest dairy exporter, is in talks to sell its stake in China's San Lu Group Ltd, which has been struck by a tainted milk scandal that killed four infants and sickened tens of thousands of children.
Fonterra, which has a 43 percent stake in San Lu Group, said said on Sunday talks were under way on a third-party acquisition of San Lu, which was the first of over 20 firms in China identified as producers of baby-milk powder contaminated with the industrial chemical melamine.
"Discussions are continuing around a number of facets of San Lu's future. These include the possibility of San Lu being acquired by a third party," Fonterra said in an e-mailed statement.
"Any solution involving Fonterra's long-term investment in San Lu or other aspects of the Chinese dairy industry will hinge on us having sufficient influence over key aspects of the dairy supply chain," the firm said.
China's Shanghai Daily reported on Friday that San Lu is facing bankruptcy in the wake of the milk scandal and a group of Chinese dairy producers, including Wahaha Group Co Ltd, Wondersun, Sanyuan Food Co and Feihe Dairy were meeting to discuss a possible takeover of San Lu.
Fonterra in September cut the value of its investments in San Lu to about NZ$62 million ($37.94 million) and said the write-down reflected the damage done to the San Lu brand and the likelihood that it would not recover.
Fonterra, an unlisted co-operative owned by around 11,000 farmers, is New Zealand's largest company and controls about a third of the world's dairy exports. It generates more than 7 percent of the country's gross domestic product.