Zong Qinghou, chairman of the board of directors of Wahaha Group, based in Hangzhou, capital of east China's Zhejiang Province, said Danone wanted to buy a majority stake in a number of Wahaha Group's businesses outside the existing joint ventures.

"Danone's plan was discussed at last Thursday's board meeting, with directors from both Wahaha and Danone present, but no agreement was reached," said Zong, who is chairman of the board of the Wahaha-Danone joint ventures.

Describing the plan as "hostile" and capable of creating a monopoly situation for Danone, Zong said the Wahaha and Danone had lived an "unhappy marriage" since 1996.

Wahaha, which started off as a small school factory, has grown into a conglomerate that produces more than a dozen product lines including bottled mineral water, dairy products, and juice packs. It has so far established 39 joint ventures with Danone since 1996.

"Danone has pumped investment of 170 million U.S. dollars into the joint ventures over the past decade, and has been able to takeout 380 million U.S. dollars in profit sharing," said Zong. "The value of the joint ventures has risen by 51 percent in that time."

At a press briefing last Thursday in Shanghai, Emmanuel Faber, president of Asia-Pacific Operations of Danone Asia-Pacific, was clearly unhappy that Zong had disclosed business details.

"The businesses outside the joint ventures have been expanding fast. It remains to be seen whether there has been a violation of the contract between Wahaha and Danone. The partners have different views," said Faber.

"We have had discussions with our Chinese partner and put forward a couple of solutions to solve the fast expansion of the businesses outside the joint ventures. The acquisition is one of the solutions but not the only one," said Faber.

Faber emphasized that the contract signed with Wahaha 10 years ago concerning the use of Wahaha as a brand name is still in effect. But he also said that Zong is and will continue to be president of the board of directors for the joint ventures. He said Danone management wanted to discuss the issues with Wahaha, in a calm, cooperative and friendly manner.

Apart from Wahaha, the French food giant also owns stakes in a number of other Chinese enterprises that produce beverages and dairy products, including Mengniu and Guangming.