Tate & Lyle, the prominent British sweetener manufacturer, has announced a significant acquisition agreement to purchase U.S.-based CP Kelco for $1.8 billion. This move is aimed at bolstering Tate & Lyle’s specialty ingredients segment and meeting the rising consumer demand for plant-based products.
The deal includes $1.15 billion in cash and the issuance of 75 million new Tate & Lyle shares to J.M. Huber Corporation, the parent company of CP Kelco. Following the transaction, J.M. Huber will emerge as Tate & Lyle’s largest shareholder, holding a 16% stake and gaining the right to appoint two non-executive directors to Tate’s board. CP Kelco, renowned for its pectin, specialty gums, and natural-based ingredients, has recently faced challenges such as volume declines and margin pressures, prompting concerns among investors.
The acquisition is expected to deliver synergies amounting to at least $50 million by the conclusion of the second fiscal year post-closure. This strategic move aligns with Tate & Lyle’s overarching strategy to capitalize on the growing trend towards sustainable, plant-derived ingredients while reducing reliance on artificial additives. CEO Nick Hampton emphasized that the acquisition would enable Tate & Lyle to effectively tap into the expanding market for sustainable food solutions.
Despite the strategic rationale behind the acquisition, Tate & Lyle’s shares experienced a decline of more than 8%, reflecting investor caution surrounding CP Kelco’s recent operational performance.
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