Tate & Lyle to Sell Stake in Primary Products to KPS

Tate & Lyle Plc agreed to sell a controlling stake in its primary products unit, which makes plant-based products for industrial markets, for $1.3 billion to KPS Capital Partners to focus on healthier food and drinks.

Under the terms of the deal announced Monday, a new company will be set up owned 50% by both parties, with the private equity firm having board and operational control.

Tate & Lyle aims to harness growing consumer demand for food and drinks that are lower in sugar, calories and fat, and contain added fiber, according to Chief Executive Officer Nick Hampton. “With the pandemic accelerating the trend towards healthier food, now is the right time to focus our business on capturing this growth,” he said.

The company intends to return 500 million pounds ($693.4 million) to shareholders by special dividend following the deal, and the rest of the proceeds will be used to strengthen the balance sheet and invest to accelerate growth. The stock rose as much as 4.1% in London trading.

Sweeteners and Starches

The transaction is expected to close in the first quarter of next year. It includes the Primary Products business in North America and Latin America, with a series of mills and plant facilities and some interests in various joint ventures. Primary Products’ European operations are not included.

The new company makes nutritive sweeteners and industrial starches. It generated revenue of 1.7 billion pounds in the year ended March 31 and has an enterprise value of about $1.7 billion.

Tate & Lyle said the move will reduce its exposure to commodities markets and bulk ingredients in North America. The new standalone unit is also expected to generate significant cash flow and “meaningful dividends” over time.

The London-based company has restructured its operations before when it sold its sugar business, including Lyle’s Golden Syrup, in 2010.

KPS specializes in investing in manufacturing and industrial companies most recently buying the largest aluminum-rolling business in Europe from Norsk Hydro ASA.

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