UPDATE 1-Brazil's Itambé, owned by France's Lactalis, sues Vigor for $124 mln -source

(Adds second source on the matter, Vigor declining to comment)

By Tatiana Bautzer

SAO PAULO, Feb 27 (Reuters) - Brazilian dairy company Itambé Alimentos SA is suing its former shareholder Vigor Alimentos SA for 400 million reais ($124 million), according to two people with knowledge of the matter.

Itambé is asking for an arbitration at the Brazil-Canada Chamber of Commerce, which often oversees Brazilian arbitration cases, alleging that Vigor caused it 400 million reais in losses when Vigor took over an export contract previously owned by Itambé.

Vigor’s contract to sell powdered milk to Venezuela priced the product at $5,800 per tonne, much higher than the local Brazilian price, the source said. Vigor exported the powdered milk from June 2015 though January 2016, when the contract ended, the source added.

Vigor, which was sold by holding company J&F Investimentos to Mexico’s Grupo Lala SAB de CV in August, declined to comment on the matter, saying it had not been yet notified of the arbitration request. Itambé did not comment.

Itambé is demanding payment of the difference between the tonne price in the contract and the regular domestic price, which was paid to Itambé after the contract was transferred to Vigor.

A second person with knowledge of the matter, though, said the contract was originated by meatpacker JBS SA, also controlled by J&F Investimentos. The contract was given to Itambe, and later transferred to Vigor in agreement between Vigor and Itambe executives.

Vigor owned a 50 percent stake in Itambé until December 2017, when a dairy cooperative that owned the other 50 percent exercised its right to acquire Vigor’s interest and subsequently sold Itambé to France’s Groupe Lactalis SA.

Vigor has challenged the acquisition in the courts and in an arbitration. A court decision recognized the deal but prevented the French group from getting management rights in Itambé.