SEVERAL companies are competing for ownership of China's former dairy giant, Sanlu Group, which ceased production in mid September after it was discovered its 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 the 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 a ton, we are considering building our own production line," said Zong Houqing, the group's head.

Zong pointed out Sanlu's equipment, materials, and skilled workers were useful for Wahaha to acquire.

According to Zong, the company currently buys at least 150,000 tons of milk powder every year. "We could put Sanlu into operation again soon after the purchase," 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 next day.

Sanyuan Food was believed to be the first company to make an offer to buy Sanlu. The company suspended its shares 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 a reputation as "China's Famous Brand." The companies include American-owned Feihe Dairy, southwestern China'a Sichuan Province's New Hope Group, and Wondersun.

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