Tate & Lyle announced today that it has agreed to sell a controlling stake in its Primary Products unit to a private equity firm in a transaction that values the new standalone business at $1.7bn (£1.2bn), including debt. The deal with KPS Capital Partners comes as the British firm focuses on healthier food and drinks.
The division, which makes artificial sweeteners and industrial starches, mainly for the North American market, generated £1.8bn of Tate & Lyle’s £2.9bn revenues in its financial year to April 2020.
The company had already flagged its plans back in April, saying it would allow it to focus on its Food & Beverage Solutions business, which works with manufacturers such as Mondelēz and Nestlé on developing recipes and ingredients to replace sugar, salt and fats in their food products.
US-based KPS Capital Partners and Tate & Lyle will each own 50% of the new company, with the private equity firm having operational and board control. Tate & Lyle expects to receive gross proceeds in cash of about $1.3bn.
“With the pandemic accelerating the trend towards healthier food, now is the right time to focus our business on capturing this growth,” said Tate & Lyle’s Chief Executive Nick Hampton.
He added: “We have been very impressed with KPS and are excited to partner with them … The proposed transaction represents an ambitious and bold step forward for Tate & Lyle.”
The new company will consist of the Primary Products business in the Americas, and an interest in its Almex and Bio-PDO joint ventures. The smaller European operations will remain with Tate & Lyle.
The group highlighted that the deal would see it substantially cut its exposure to commodities markets and bulk ingredients in North America.
The split is expected to complete in the first quarter of 2022 following approval from shareholders and regulators.
