By staff reporter Wang Shanshan
From Caijing Online

On February 13, Beijing-based Sanyuan Food Co. (SSE: 600429) announced it would bid for the assets of the now defunct Sanlu Group, the dairy at the center of tainted milk scandal that sickened hundreds of thousands of children in China.

Sanyuan Food’s parent company Sanyuan Group and its Hebei subsidiary will join together to bid Sanlu, offering no more than 110 percent of Sanlu's total value, said Sanyuan.

To finance the bid, Sanyuan Food will issue 200 to 250 million new shares at 4 yuan per share to Sanyuan Group and Beijing Enterprises Co. Ltd., the company’s largest shareholder. The issuance, which is pending government approval, could raise up to 1 billion yuan.

Having failed to repay 1.1 billion yuan in debts, Sanlu was formally declared bankrupt on February 12. The company’s assets will be sold on March 4 in Shijiazhuang, the capital of Hebei province and hometown to Sanlu.

The assets are valued at 726 million yuan and include the dairy’s property and equipment, a 98.8 percent stake in Linhe Dairy Co., a 70 percent stake in Tangshan Sanlu Diary Co., as well as a 16.97 percent stake in Shijiazhuang Junlebao Dairy Co.   

Since the milk scandal broke out in September, many have speculated that Sanyuan would end up with Sanlu's assets. In December, Sanyuuan registered a wholly owned subsidiary in Shijiazhuang, which was seen as a vehicle for taking over Sanlu. Sanyuan also leased part of Sanlu's plants for production after Sanlu filed for bankruptcy.

Sanyuan’s share price surged 6.15 yuan to the daily trading limit on February 16 when the company resumed trading. Trading in Sanyuan’s shares has been suspended since September 25 because of rumors about a possible Sanlu acquisition.

Full article in Chinese: http://www.caijing.com.cn/2009-02-14/110068669.html