Beijing's Sanyuan Group and one of its subsidiaries paid 616.5 million yuan (90 million dollars) for some of Sanlu's assets at a court auction, the Dairy Association of China said in a statement.

Sanlu, formerly one of China's largest milk firms, was the first of 22 dairy makers found last year to have been selling melamine-tainted milk products that caused the deaths of six infants in China and sickened nearly 300,000.

The chemical is normally used to make plastics but was added to the dairy products to give them the appearance of higher protein content.

"Sanyuan's successful bid will ... help China's dairy industry to rationalise and is positive for restoring market confidence," the Dairy Association of China said in the statement.

Sanlu was formally declared bankrupt last month by the Intermediate People's Court of Shijiazhuang, the northern Chinese city where the company is based.

The assets Sanyuan bought at the auction included Sanlu Group's land use rights, buildings, machinery and equipment, and one of Sanlu's subsidiaries, Wednesday's state-run China Daily newspaper reported.

The Beijing food company said it would also bid for Sanlu-owned equities in two dairy firms in north China, that were to be auctioned later, according to other Chinese media reports.

One of the requirements of the auction, open only to domestic dairy producers, was that bidders had no involvement in the melamine scandal, the China Daily said.

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