Tate & Lyle to acquire CP Kelco for $1.8 Billion

June 20, 2024

Tate & Lyle has announced an agreement to acquire the entire issued share capital of CP Kelco U.S., CP Kelco China, and CP Kelco ApS, along with their subsidiaries (collectively ‘CP Kelco’), from J.M. Huber Corporation (‘Huber’) for $1.8 billion (£1.4 billion). The acquisition will be conducted on a cash-free, debt-free basis.

Over the past six years, Tate & Lyle has undertaken a strategic transformation to focus on speciality food and beverage solutions, aligning with consumer trends for healthier, tastier, and more sustainable food and drink. This transformation culminated with the announcement on 23 May 2024 of the proposed sale of Tate & Lyle’s remaining interest in Primary Products Investments LLC (‘Primient’).

The acquisition of CP Kelco is expected to significantly advance Tate & Lyle’s strategy to become a leading provider of speciality food and beverage solutions. The transaction is projected to drive revenue growth and improve adjusted EBITDA margins over the next few years. It is also expected to be accretive to adjusted earnings per share in the second full financial year following completion, with further benefits anticipated thereafter.

Transaction Details

Tate & Lyle will acquire CP Kelco for $1.8 billion (£1.4 billion), subject to customary adjustments, comprising:

$1.15 billion (£905 million) in cash from new and existing debt facilities and cash resources.
Issuance of 75 million new Tate & Lyle ordinary shares to Huber, valued at $645 million (£510 million).
Deferred consideration of up to 10 million additional Tate & Lyle ordinary shares, subject to performance criteria based on Tate & Lyle’s share price, to be delivered to Huber approximately two years post-completion.
The total consideration represents 10 times CP Kelco’s adjusted EBITDA for the year ended 31 December 2023, including cost synergies.

Strategic Rationale

The acquisition brings together two complementary businesses—Tate & Lyle, a leader in sweetening, mouthfeel, and fortification, and CP Kelco, a leader in pectin and speciality gums. This combination is set to create a global leader in speciality food and beverage solutions, enhancing Tate & Lyle’s capabilities and broadening its product portfolio. The merged entity is expected to benefit from growing global consumer demand for plant-based, clean-label, and sustainable ingredients.

The integration of CP Kelco’s expertise will bolster Tate & Lyle’s R&D and innovation capabilities, driving the development of new plant-based ingredients and solutions. The combined company aims to capture growth opportunities in the speciality food and beverage ingredients market, valued at $19 billion and growing at a 6% compound annual growth rate.

Financial Impact

The acquisition is expected to accelerate Tate & Lyle’s revenue growth towards the upper end of its 4%-6% per annum target. The combined entity aims to achieve cost synergies of at least $50 million (£40 million) by the end of the second full financial year post-completion, with significant revenue synergies anticipated in the medium term. The transaction is also projected to enhance free cash flow conversion and exceed Tate & Lyle’s weighted average cost of capital within five years post-completion.

Comments from Leadership

Nick Hampton, Chief Executive of Tate & Lyle, stated, “A combination with CP Kelco is the perfect fit with Tate & Lyle’s growth-focused strategy and purpose. It significantly strengthens our Sweetening, Mouthfeel and Fortification platforms, enhances our solutions capabilities, and unlocks new growth opportunities.”

David Hearn, Chair of Tate & Lyle, remarked, “Today’s announcement represents a major acceleration in the delivery of Tate & Lyle’s growth-focused strategy. We are delighted that Huber will become a long-term shareholder and that their new non-executive directors will join our Board.”

Didier Viala, President of CP Kelco, expressed, “We are delighted to be joining with Tate & Lyle to create a leading and differentiated speciality food and beverage solutions business. Our complementary portfolio and deep technical expertise will bring new value to our customers.”

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