December 24, 2008

Sanlu declared bankrupt on milk scandal

Sanlu Group has been declared bankrupt by a court in the city of Shijiazhuang in the aftermath of the melamine-tainted milk scandal, according to business partner Fonterra Cooperative Group.

Sanlu will be managed by a court-appointed receiver who will have six months to sell its assets and pay creditors, said Fonterra, adding that the bankruptcy order was issued in response to a petition from a creditor.

Fonterra, which owns 43 percent of a venture with Sanlu, has written off the NZ$200 million (US$114 million) investment.

Beijing Sanyuan Group Co. and Wondersun Dairy Product Co. are among the Chinese milk producers interested in buying some of Sanlu's 30 processing plants, said the state media.

Fonterra spokesman Greg Shand said the company is aware of the reported interest in Sanlu's assets and supports their sale.

The tainted milk has killed at least six babies and sickened many others. As many as 22 companies, including dairy giants Mengniu and Yili, were found to have sold milk contaminated with melamine, an industrial chemical that could cause kidney problems.

China's government is drawing up compensation plans for affected families, said the Health Ministry on December 11.