December 31, 2008

China's Sanyuan Foods to rent Sanlu assets


Beijing Sanyuan Foods Co. has agreed to rent some assets from Sanlu, which was declared bankrupt due to the melamine-contaminated milk scandal.


Shijiazhuang's government said that Sanyuan and Sanlu signed a rental contract on Monday (Dec 29).


Under the agreement, a Sanyuan subsidiary will be allowed to use manufacturing assets in six key plants of Sanlu to produce dairy products.


Sanyuan is weighing up the cost of a possible takeover of Sanlu, said dairy analyst Tang Zhiqing.


A spokesman of the Shijiazhuang government said the move aims to prevent Sanlu's assets from devaluating as the dairy giant undergoes bankruptcy proceedings, while also protecting the benefits of milk farmers.


Sanlu stopped production on September 12, and is currently facing a RMB1.1 billion (US$160 million) debt, said the Shijiazhuang government last week.

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