Shares in Tate & Lyle bounced this week after the 162-year-old company said that it is exploring the sale of a controlling stake in the largest part of the firm, says Hari Govind on Bloomberg. “One of Europe’s leading sugar producers” until it sold that business in 2010, Tate & Lyle has since focused on food ingredients, including sweeteners, with this division generating £1.8bn in sales last year, around 60% of total revenue.
Good news, says Lex in the Financial Times. While the production of sweeteners is a “steady cash generator”, demand for them is gradually falling thanks to the growing awareness about their role in obesity. The sweetener business is also obscuring Tate & Lyle’s “fast-growing” food and beverage division, especially its “speciality ingredient” business, which helps food manufacturers replace sugars and fats with “healthier alternatives”. Selling the sweetener should therefore raise cash that could be reinvested in the company or used for acquisitions, as well as improving the group’s standing with “socially conscious investors”.
But a sale “is not without risk”, says Graham Ruddick in The Times. The group’s two main businesses are “deeply intertwined”, with its US factories making products for both divisions. There is also the risk that the move could create tax problems as it currently enjoys a “lower tax rate in the US thanks to its ability to offset UK losses and US profits”. Tate & Lyle will also need to get a good price, with analysts suggesting that it should aim for £1.2bn to make the deal worthwhile.
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