An investigation has identified a French meat-processing firm as a likely culprit in the horsemeat scandal that has enraged consumers across Europe and implicated traders and abattoirs from Cyprus to Romania.

Separately, British police investigating alleged mislabeling of beef products arrested three people on Thursday at facilities in Wales and Yorkshire that had handled horsemeat and were raided by police earlier, British media reported.

No further details on the British arrests were immediately available.

The French probe into how horsemeat found its way into ready meals sold across Europe found that the Spanghero firm labelled meat as beef when it knew what it was processing may have been horse, the government said on Thursday.

Spanghero, based in the town of Castelnaudary near Toulouse in southwest France, could have its operating license revoked and will face legal action if the suspicions are confirmed, France's consumer affairs and farm ministers told a news conference.

"It would seem that the first agent in this chain to label the meat 'beef' was indeed Spanghero," Consumer Affairs Minister Benoit Hamon said. "This was either a very big mistake or a deception for profit."

There was no indication that a Romanian firm supplying meat to Spanghero had mislabeled what was in fact horsemeat, he said, arguing that Spanghero could not have failed to notice the meat it was importing was much cheaper than beef.

"The investigation shows Spanghero knew the meat labelled as beef could be horse. There was a strong suspicion," he said.

Spanghero denied the accusations and said it firmly believed what it was selling was beef. "There is an inquiry under way which will determine whether there was negligence or not," a spokeswoman said.

The privately-owned company, founded by two brothers, sons of 1970s French rugby star Walter Spanghero, produces thousands of tons of processed meat, sold in nondescript blocks, and jars of regional dishes like cassoulet from its premises in Castelnaudary.

Horsemeat profits
The scandal, which has triggered recalls of ready meals and shattered confidence in Europe's vast and complex food industry, erupted last month when tests carried out in Ireland revealed that meat in some "beef" products was up to 100 percent horsemeat.

The British government and the European Union have called for a high-level meeting to investigate, and the issue will be on the agenda of a Feb. 25 farm ministers meeting.

The European Commission has proposed increased DNA-testing of meat products to try to establish the scale of a scandal that has exposed just how many countries a portion of mince may have traveled through before ending up in a frozen lasagna.

EU legislation states that horsemeat can be sold in meat products on the condition it is declared on the label. Member states are responsible for proper enforcement of the rules.

Hamon said the French investigation found that Spanghero had generated a profit of $733,800 over six months by selling cheap horsemeat as beef in a supply chain that reached through 28 companies in 13 countries.

He also wagged his finger at another French firm, Comigel, which used processed meat from Spanghero to make frozen "beef" ready meals, saying it should have noticed when it thawed the meat blocks that they did not look and smell like beef.

Comigel said in a statement it paid market prices for what it thought was beef. It said it had alerted the authorities as soon as it became aware of a problem and had filed a legal complaint as a victim of fraud.

It also said its frozen meat had not been thawed for inspection before entering its factory for cooking, so its staff would not have noticed anything unusual in its appearance or smell.

As regulators across Europe raced to test food products, Britain's Food Standards Agency said six horses slaughtered in Britain that tested positive for the drug phenylbutazone were exported to France and may have entered the human food chain.

Phenylbutazone, known as bute, is an anti-inflammatory painkiller for sporting horses which is banned for animals intended for human consumption as it is potentially harmful.

Asda, one of Britain's biggest supermarkets, said it was recalling its beef bolognese sauce after a preliminary test result suggested the presence of horse DNA in the product.

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