Sanlu Group, the center of a melamine adulteration milk scandal that killed at least six babies and sickened 290,000 others, confirmed on Wednesday that it had filed for bankruptcy.
The Intermediate People's Court of Shijiazhuang City, where the company is headquartered, notified the company that it will accept the bankruptcy petition, said a Sanlu spokesman, who declined to say when the filing was made.
Once the bankruptcy procedure starts, Sanlu has to compensate its creditors, hand over income taxes and pay its employees. Sanlu will also be responsible for its sales agents, for bank debts, and for the sick children.
Mei Xinyu, a researcher with the Ministry of Commerce, said that if Sanlu went bankrupt, Sanyuan would put aside its debts and start an acquisition procedure. "Stockholders and government would like Sanyuan to purchase Suanlu's equity, but the cost is too high for the buyer," noted Mei. It is rumored that Sanlu will be liable for 900 million yuan in compensation claims over the tainted milk scandal.
New Zealand's Fonterra is also a shareholder of Sanlu. A senior manager of its China zone stated that the volatile situation makes it difficult for Fonterra to be clear about the precise position with regard to Sanlu's bankruptcy.
Sanlu products were found to contain melamine, which was being used to increase the apparent protein content in milk. The use of the industrial chemical is restricted in food.
Children can develop kidney stones after drinking such milk.
The scandal surfaced in September. The Ministry of Health said last month that 1,272 infants nationwide were still being treated for kidney disorders caused by the milk.
The Shijiazhuang city government is said to have set up a restructuring team headed by a vice mayor to negotiate with major players interested in buying Sanlu, including Wandashan and Sanyuan.
Sanlu is one of the largest companies in Shijiazhuang, employing almost 10,000 people.
(Xinhua News Agency and China.org.cn December 24, 2008)
