China's Sanyuan Sets Up Branch To Facilitate Sanlu Acquisition

Beijing based Sanyuan Foods has published a report which says that its board of directors has approved a proposal to set up a subsidiary in Shijiazhuang to facilitate its proposed acquisition and merger with Sanlu.

The report said Sanyuan will invest CNY5 million to set up a wholly-owned subsidiary in Shijiazhuang, the location of Sanlu's headquarters. The new company will be engaged in the production and processing of dairy products.

According to Chen Yu, a dairy industry expert, Sanyuan's aim in setting up this subsidiary is obvious, because the company needs a local organization to control and operate the local resources in Shijiazhuang, so as to complete its acquisition and merger of Sanlu's assets.

However, Chen said there were still many problems that had to be addressed. The setting up of this new company only means that Sanyuan's acquisition of Sanlu is progressing, but it does not mean that it is certain that Sanyuan will acquire Sanlu.

Since the breaking of the melamine scandal in China, the future of Sanlu has become the concern of the dairy industry. Rumors about Sanlu's future keep cropping up. Dairy companies, including Sanyuan, have admitted that they were negotiating with the relevant departments about acquisition of Sanlu, but they refused to give further details.