Tate & Lyle acquires specialty ingredients firm CP Kelco for $1.8bn

20th Jun 2024 07:31

(Sharecast News) - Food and beverage products group Tate & Lyle is to buy Atlanta-based pectin, gums and specialty ingredients firm CP Kelco from JM Huber Corporation for $1.8bn, giving the latter a 16% stake in the business.

The deal, which includes CP Kelco's US, Chinese, Danish subsidiaries, "significantly accelerates Tate & Lyle's strategy to be a leading and differentiated speciality food and beverage solutions business", the UK group said in a statement.

The acquisition of CP Kelco, which is known for speciality products like gellan gum, pectin, xanthan gum and refined locust bean gum, is expected to result in cost synergies of at least $50m by the end of the second full financial year post-completion, and revenue synergies of up to 10% of CP Kelco's revenue over the medium term.

It will also help Tate & Lyle drive revenue growth towards the higher end of its 4-6% per-annum target and help bolster operating profit margins over the next few years.

Under the terms of the transaction, Huber will take a 16% stake in Tate & Lyle and be allowed to appoint two non-executive directors to Tate & Lyle's board.

The deal value comprises $1.15bn in cash from new and existing debt facilities and cash resources, the issue of 75m Tate & Lyle shares worth $645m to Huber, along with a deferred consideration of up to 10m additional shares delivered two years after the deal completes.

"A combination with CP Kelco is the perfect fit with Tate & Lyle's growth-focused strategy and purpose," said chief executive Nick Hampton.

"We've been collaborating with CP Kelco on innovation projects for many years and are very aware of their excellent products and the outstanding capabilities of their people. We are excited about the opportunities the combination will create for customers across the world, and the opportunities for employees in both companies to develop their careers across a broader global business."

In a separate statement, Tate & Lyle also announced the launch of a previously mentioned £215m share buyback following the £279m sale of its 49.7% stake in Primient, its primary products business in North America and Latin America, to KPS Capital Partners. The buyback will start on Thursday and end on or before the end of March 2025.