UK – Tate & Lyle has confirmed its intentions to sell a controlling stake in its Primary Products unit to a new long-term financial partner, as it looks to focus on its Food and Beverage Solutions arm.
The Telegraph, which first reported the potential sale, said that the auction could be worth up to £1.2bn (about US$1.45bn) adding that US private equity giants Apollo Global Management and Cerberus had held talks with Tate & Lyle over the sale.
Historically known as one of Europe’s leading sugar producers, Tate & Lyle sold that business a decade ago and now focuses on food ingredients, including sweeteners like Splenda and Tasteva.
Tate & Lyle’s Primary Products business manufactures nutritive sweeteners, industrial starches used in paper and packaging, as well as acidulants and products used for animal nutrition.
The division, which made revenues of £1.8bn (US$2.17 billion) in the year to April 2020 or more than 60% of the total revenue, competes with larger US-based rivals Ingredion and Archer Daniels Midland.
Through the divestiture, the company looks to focus on its smaller Food & Beverage Solutions business which made annual revenues of £942m (US$1.138 billion).
This division develops ingredient solutions to help companies reduce sugar, calories and fat, as well as add fibre and provide texture and stabilities in a variety of applications including dairy, beverages, bakery products, soups, sauces and dressings.
It is reported to deliver higher profit margins and has more growth potential than its sweeteners operation, as consumers turn to healthier eating options.
Last year, Tate & Lyle entered into agreements to acquire Sweet Green Fields and Chaodee Modified Starch, in an effort to bring better tasting and healthier foods to consumers.
According to the official statement, the transaction “would enable Tate & Lyle and the new business to focus their respective strategies and capital allocation priorities and create the opportunity for enhanced shareholder value”.
Tate & Lyle says discussions with potential new partners are at an early stage, but there can be no certainty that a transaction will be completed.
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