New Zealand milk cooperative Fonterra said on Wednesday that it was in talks with French food and dairy giant Danone to settle a dispute over a recall of baby milk.

In August, Danone recalled products containing milk from Fonterra in eight countries in the Asia-Pacific region because of a false alarm that the milk was infected with botulism.

In a statement on its website, Fonterra said that it was in talks with Danone "but strongly denies any legal liability to Danone in relation to the recall."

However, the purpose of the talks was to reach "a mutually acceptable commercial outcome," Fonterra said.

On Friday, Danone said that it was preparing action to obtain compensation for the effects of the recall.

Fonterra, the biggest milk cooperative in New Zealand grouping 13,000 farmers, said in August that three lots of a product used for baby products and in drinks for sportsmen and women contained bacteria which could cause paralysis or death.

At the end of August, Danone said that it was weighing its compensation options since the false scare would affect its third-quarter earnings in Asia.

That was three days after authorities in New Zealand had said that the scare had been a false alarm.

The bacteria detected was in fact inoffensive.

The scare led to infant formula being pulled off shelves from China to Saudi Arabia.

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