Chinese dairy Beijing Sanyuan Group today (4 March) paid CNY616m (US$90m) for the core assets of bankrupt dairy group Sanlu, the company at the centre of last year's melamine scandal.

Previously one of China's top milk powder producers, Sanlu was linked to the melamine contamination that led to at least six infant deaths and thousands of others falling ill.

Though consumer confidence in milk powder remains low, other products like fresh milk and yoghurts are growing fast, Liu Xiao Feng, food industry analyst at Minzu Securities in Beijing, told just-food.

Additional capacity will help Sanyuan gain more from that growth.

"The deal will turn Sanyuan from a regional dairy into a national one. It now has a chance to compete with the first-class companies like Yili and Mengniu," he said.

Liu said the Chinese government feared major disruption to the country's dairy industry if Hebei-based Sanlu halted operations.

Sanyuan has acquired land use rights, buildings, machinery and equipment as well as one of Sanlu's subsidiaries, the Linhe Dairy.

The company was unavailable for comment today but president Zhang Fu Ping told shareholders on Monday that the firm would recover 30%, or CNY1bn, of Sanlu's total sales this year, doubling its revenues to more than CNY2bn.