A similar deal involving Nestle's canned liquid milk in Malaysia, Singapore and Brunei is expected to be completed soon, including Teapot-brand milk in Malaysia.

The deal in the four countries is actually an agreement between F&N and Societe des Produits Nestle SA (Switzerland), a wholly owned subsidiary of food giant Nestle SA.

Montacha Sudamphan, corporate communications manager at Nestle (Thai), said yesterday the agreement between her company and F&N was signed yesterday and that F&N would be fully operating the three units by next May.

She declined to reveal the cost of the deal, but Reuters reported the final figure was about US$80 million (Bt2.97 billion). The deal has a specific period, but she also declined to reveal it.

As part of the agreement, F&N will take over some of the Nestle (Thai) plants in the Navanakorn Industrial Estate and Nakhon Ratchasima province.

Montacha said the sale of the three units would affect Nestle (Thai) revenues in the short term but enable the company to concentrate on its other businesses that afforded higher profits and better market potential. This will eventually contribute to a better performance, in line with Nestle's global strategic direction.

She said that at the same time, the Nestle brand in the three units would gain stronger customer awareness.

Montacha said Nestle had many products to market and might be unable to focus on any single area, whereas F&N was an expert in manufacturing and marketing bottled products. It mainly buys licenses from various countries to manufacture and market others' products.

Its current range of products includes Heineken beer, Tiger Beer, Sunkist juice and Coca-Cola. It also has a soft drink product of its own.

Meanwhile, F&N believes the deal will help double the annual turnover of its dairy division.

According to Reuters, its access to the large Thai market will also offer a path into the untapped markets of Burma and Indochina.

"In one stroke, we have gained access to a large population base and reduced our dependence on the relatively small Malaysian market, which augurs well for the future of F&N," said chief executive Tan Ang Meng.

Nestle has also agreed to divest its 25 percent stake in F&N's Malaysian subsidiary, Premier Milk Sdn Bhd.

"The deal will increase the dairy division's annual turnover of 600 million ringgits (Bt6.1 billion) to more than 1.5 billion ringgits (Bt15.24 billion) and it is expected to significantly enhance its future contributions to the F&N group," Tan said.

The 310-million-ringgits Premier Milk deal will be funded through internal funds and borrowings, he said, but gave no details.

Montacha said Nestle (Thai) will need a slight change in its human resources management.

Nitida Asawanipont

The Nation, Agencies

Kuala Lumpur