October 20, 2008

Fonterra Likely to Sell Stake in San Lu

New Zealand-based dairy company Fonterra Cooperative Group is looking at selling its stake in San Lu Group, the company which has been at the center of the recent milk food contamination scandal in China.

Reuters has quoted Fonterra as saying: "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.

"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."

Following the tainted milk scandal in China, Fonterra cut its stake in San Lu by over $100 million to $62 million because of the damage done to the brand.

It is also learnt that San Lu is currently facing bankruptcy. Five firms including Wahaha Group, Wondersun, Inner Mongolia Yili Industrial Group, Sanyuan Foods and Feihe Dairy, are discussing a possible takeover of San Lu.