Tate & Lyle to be re-positioned with £1.2 billion deal
Tate & Lyle has entered into an agreement to sell a controlling stake in a new company and its subsidiaries, comprising its Primary Products business in North America and Latin America and its interests in the Almidones Mexicanos (Almex) and DuPont Tate & Lyle Bio-Products Company joint ventures, to KPS Capital Partners. KPS is a leading global private equity firm, headquartered in New York. Tate & Lyle and KPS will each own 50% of the new company (NewCo) with KPS having Board and operational control.
The transaction creates two standalone businesses – Tate & Lyle and NewCo – each positioned to focus on their respective strategies and capital allocation priorities:
– Tate & Lyle – A leading global food and beverage solutions business focused on faster growing speciality markets.
– NewCo – A leader in plant-based products for the food and industrial markets.
NewCo will comprise Tate & Lyle’s Primary Products business in North America and Latin America consisting of the following operations: Primary Products’ European operations, which in aggregate represented approximately 5% of Primary Products revenue in the year ended 31 March 2021, are not included in NewCo and will remain with Tate & Lyle.
In the financial year ended 31 March 2021, on a proforma basis, NewCo generated revenues of £1.7 billion and adjusted operating profit of £165 million. As at 31 March 2021, NewCo had gross assets of £1.3 billion.
The deal values the whole of NewCo at an enterprise value of approximately US$1.7 billion (£1.2 billion), equivalent to a multiple of 5.1x EBITDA for the year ended 31 March 2021. Tate & Lyle expects to receive gross cash proceeds of approximately US$1.3 billion (£0.9 billion), resulting in net cash proceeds of approximately US$1.2 billion (£0.9 billion) after customary adjustments and transaction costs.
Completion is expected in the first quarter of the 2022 calendar year subject to approval by Tate & Lyle’s shareholders, anti-trust clearances, completion of a reorganisation and IT separation and other customary conditions. A circular to shareholders will be posted and the General Meeting will be scheduled in due course.
The transformational move re-positions Tate & Lyle as a global food and beverage solutions business focused on faster growing speciality markets, with opportunity to:
– Benefit from growing global consumer demand for healthier food and drink, accelerated by the global pandemic.
– Build on FBS’ strong track record of growth over the last three years through a step-up in R&D investment to accelerate innovation.
– Increase focus on solutions development to support and strengthen customer relationships.
The transaction also strengthens Tate & Lyle’s attractiveness as a partner to other speciality ingredients businesses, while substantially reducing its exposure to commodities markets and bulk ingredients in North America.
Nick Hampton, Chief Executive of Tate & Lyle, commented: “The announcement represents the next phase in the evolution of Tate & Lyle. Our one strong company will become two stronger businesses, both in a position to pursue new and exciting growth opportunities in their respective markets.
“Building on the strong platform established over the last three years, the proposed transaction will transform Tate & Lyle into a purpose-led, global food and beverage solutions business, serving faster growing speciality markets. With our new focus and a step-up in R&D investment, innovation and solutions development, we will be able to significantly enhance how we serve our customers, and accelerate growth. Our deep scientific expertise, unique product portfolio and leading technical capabilities in sweetening, mouthfeel and fortification, position us very well to benefit from growing consumer demand for food and drink that is lower in sugar, calories and fat, and with added fibre. With the pandemic accelerating the trend towards healthier food, now is the right time to focus our business on capturing this growth.”
