Beijing dairy Sanyuan may be considering a takeover of China's Sanlu Group, the dairy at the centre of the melamine contamination scandal, according to local reports on Friday (26 September).

Sanyuan suspended trading on the Shanghai stock market last week, citing a possible acquisition announcement. Its own products have been cleared of any contamination.

Unidentified industry officials told the China Securities Journal that Sanyuan was studying a Sanlu takeover.

Sanlu is facing bankruptcy and may spend as much as CNY700m (US$102.3m) on recalls of more than 10,000 tons of formula contaminated with melamine, said the paper. Four babies have died and more than 50,000 have had to be treated for kidney complications caused by the contamination.

Fonterra, which owns 43% of Sanlu, told just-food it had not been approached about selling its stake in the company.

"We are aware of the speculation but we haven't received an offer from them. We are however seeking meetings with the relevant government officials in China to discuss Sanlu's future," said a spokeswoman for the firm in Singapore.