Hangzhou Wahaha Group Co. Ltd., which is 51 percent owned by Danone, has turned down the French firm's offer of four billion yuan for its remaining assets.

The French food giant on Wednesday issued an ultimatum, giving its Chinese partner 30-days to end the feud otherwise Wahaha's businesses that were established outside the joint venture will be sued.

At Wednesday's news conference, Danone accused Wahaha of violating a non-compete clause in a joint venture contract signed in 1996 by secretly setting up independent sales companies.

"Wahaha did set up other companies, but not secretly," Wahaha said in response. "These companies were audited by Danone every year."

"The fact is Danone has violated the spirit of the contract," said Wahaha.

Wahaha accuses Danone of doing a number of deals in China that have undermined the Wahaha-Danone joint venture. It says these include:

-- In 2000, Danone bought 92 percent of Wahaha's biggest rival, Guangdong Robust Group, which Wahaha says cost it market share and the loss of 49 million yuan in profits that year.

-- The French company has bought stakes in at least seven leading Chinese food and dairy companies.

-- It has 45.2 percent stake in Shanghai-based Bright Dairy and Food Co, and a 22 percent stake in Beijing-based Huiyuan Juice Holdings Co.

-- Last December, Danone also set up a joint ventures with Mengniu Dairy Co, China's largest liquid milk producer, in which it owns 49 percent of the stake.

"Danone has pumped over 170 million U.S. dollars into the joint ventures over the past decade," said Zong.

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