PT Indofood Sukses Makmur, the world's largest maker of noodles, is planning to expand into the dairy business by fully acquiring Drayton Pte. Ltd., which owns a controlling stake in local dairy company PT Indolakto.

In a recent statement to the Indonesia Stock Exchange (IDX), Indofood said it had signed a Memorandum of Understanding (MoU) with Pastilla Investment Ltd., the owner of Drayton.

The MoU grants Indofood the authority to conduct an operational and financial appraisal of Indolakto and Drayton, which owns a 68.57 percent share of Indolakto, before acquiring them.

Indofood refused to disclose the cost of the acquisition.

Indonesia's dairy industry is considered underdeveloped, and to have a large potential for expansion. The country's consumption of milk and dairy products per capita is low compared to neighboring countries.

"The dairy industry is a promising industry," Indofood said.

According to the Health Ministry, Indonesia's per capita consumption of milk was nine liters in 2007, while Vietnam's and Malaysia's were 10.7 and 25.0 liters, respectively.

Indonesia's population is estimated at 234 million, far higher than Vietnam's and Malaysia's, which are 85 million and 25 million, respectively.

Indolakto produces a number of dairy products, including cream, butter, skim milk and ice cream. Some of Indolakto's brand names are: Indomilk, Cap Enaak, Tiga Sapi, Orchid Butter and Indoeksrim.

Indonesian conglomerate Salim Group, which owns Indofood, had held a stake in Indolakto before it sold the shares in 1997 during the Asian financial crisis to offset losses.

Last year, Indofood booked Rp 27.85 trillion (US$3.04 billion) in sales, up 26.96 percent from Rp 21.94 trillion in 2006. The company's net profit last year was Rp 2.8 trillion, 46.75 percent up from Rp 1.97 trillion in 2006.

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