A rival of Fonterra's bankrupt Chinese dairy investment Sanlu is renting assets from the failed company, Chinese media reports say.
State news agency Xinhua said Sanlu had leased its plants to a subsidiary of Beijing Sanyuan Foods.
The information office of the Shijiazhuang Government in Hebei province saida lease had been signed and the Hebei Sanyuan company would start production at the plants that had been shut down on September 12.
The plants included four which made dairy products, a packing plant and farms.
Sanlu was 43 per cent owned by Fonterra and was one of 22 firms caught up in a Chinese scandal in which the industrial chemical melamine was added to watered-down milk to boost protein levels, leaving at least six babies dead and nearly 300,000 sick.
Fonterra confirmed last month that a court in Shijiazhuang had issued a bankruptcy order against Sanlu, in response to a petition from a creditor.
Asked at that time if Fonterra wanted to buy Sanlu assets, the company said it was exploring a range of options and would see how the process unfolded.
A 3000-cow pilot dairy farm in Tangshan was 85 per cent owned by Fonterra, with the other 15 per cent held by Sanlu and part of the bankruptcy sale.
Fonterra said it had the option of buying the 15 per cent stake it did not already own.
A Fonterra spokesman said yesterday all Sanlu assets and liabilities were now in the hands of a court-appointed receiver who would determine how they were managed from now on.
"This includes Sanlu's 15 per cent stake in Fonterra's Tangshan best practice dairy farm," he said.
The China Daily newspaper said 15 people would stand trial in relation to the crisis. Former Sanlu chairwoman Tian Wenhua and three other company executives had pleaded guilty to producing and selling fake or substandard products. Media reports say a verdict may not be reached for several weeks. Tian is expected to be sentenced to life imprisonment.
In September Fonterra wrote down its stake in Sanlu - bought for US$107 million in 2006 - by $139 million, leaving a book value at that time of about $62 million.
In November chief executive Andrew Ferrier said a full write-off was increasingly likely. A full write-off was included in assumptions for a reduced forecast payout to farmers of $6 a kilogram of milksolids for the 2008/09 season and an estimated fair value share price for the 2009/2010 season of $4.47.
