By staff reporter Wan Shanshan

(Caijing.com.cn) Sanlu Group, the now defunct dairy company at the center of the tainted milk scandal, auctioned all but two of its assets for 617 million yuan on March 4.

Fan Xueshan

Beijing-based Sanyuan Group Co. and its Hebei subsidiary jointly bought Sanlu’s valid assets and its 98.8 percent stake in Xinjiang Helin Dairy Co.

But Sanlu’s 70 percent stake in Tangshan Sanlu Dairy Co. and 16.97 percent stake in Shijiazhuang Junlebao Dairy Co. were not included in the March 4 auction.

A bid participant told Caijing that Sanlu’s receiver, a team appointed by the court to manage the bankrupt company, confirmed that Sanlu would withdraw the two items from the bid late in the day on March 3.

Wang Qin, board secretary of Sanyuan Group’s listed unit Sanyuan Food Co., told Caijing that the assets were excluded from the bid because shareholders of the two companies are calling for preemption rights.

“It is a normal adjustment; the assets will be sold another day,” said Li Bo, an employee of Hebei Jiahai Auction Co., which was in charge of the auction. “The sale of the rest of the assets will not be delayed too long,” added Li.

“Sanyuan can only obtain assets that are wholly-owned by Sanlu through the auction, but for companies that Sanlu has an interest in, shareholders have preemption rights according to corporate law,” said an employee of one of the companies, which is seeking to acquire the stake. “The price needs to be discussed, but we haven't received a reply from Sanlu's receivers,” the employee said.

Li Shuguang, professor of bankruptcy law at China University of Politics and Law, told Caijing that the auction procedures for Sanlu's assets should be conducted in accordance with bankruptcy, auction and corporate law. “The assets of bankrupt companies should be auctioned, and if shareholders with preemption rights accept the last proposed price, they have the right to buy the assets first,” said Li.

The price for the assets opened at 600 million yuan. Sanlu’s total assets, including the non-auctioned items, were previously valued at 726 million yuan. Two other companies also participated in the auction, which took place in Shijiazhuang, where Sanlu was headquartered.

Chinese story : http://www.caijing.com.cn/2009-03-04/110112305.html