US-based private equity firm KPS Capital Partners has agreed to acquire a controlling stake in Tate & Lyle’s Primary Products business in North America and Latin America. The transaction will form a new company, NewCo, specializing in plant-based products for the food and industrial markets, and valued at an enterprise of approximately US$1.7 billion.

KPS and Tate & Lyle will each own approximately 50 percent of NewCo with KPS having operational control. 

Completion of the transaction is expected in the first quarter of 2022 and is subject to customary closing conditions and approvals.

Shared values
According to Michael Psaros, co-founder and co-managing Partner of KPS, KPS and Tate & Lyle have “complete alignment of interests” and have cemented a partnership based on shared values such and a demonstrated commitment to sustainability.

“Our investment in NewCo will create a leading, independent and focused manufacturer of critical corn- derived ingredients for both food and industrial markets. The size and scale of NewCo, and the tremendous growth opportunities made available by serving as a critical supplier to global food, beverage and industrial companies, forms the foundation of a tremendous investment platform,” he explains. 

KPS intends to work closely with the management team of the Primary Products Business to accelerate growth opportunities by making substantial investments in NewCo’s assets and operations, while also pursuing synergistic add-on acquisitions. 

Long-term strategy
The transformational move re-positions Tate & Lyle as a global food and beverage solutions business focused on faster-growing specialty markets, with the opportunity to:

• Benefit from growing global consumer demand for healthier food and drink, accelerated by the global pandemic.
• Build on Food & Beverage Solutions’ strong track record of growth over the last three years by stepping up in R&D investment to accelerate innovation.
• Increase focus on solution development to support and strengthen customer relationships.

“With the pandemic accelerating the trend toward healthier food, now is the right time to focus our business on capturing this growth,”  says Nick Hampton, chief executive of Tate & Lyle.

According to the announcement, the move will create two standalone businesses – Tate & Lyle and NewCo – each positioned to focus on their respective strategies and capital allocation priorities. 

Twenty-year long-term agreements have been established between Tate & Lyle and NewCo to provide supply security and economic protection over the Food & Beverage Solutions’ products made in NewCo’s facilities, and to ensure continued alignment of objectives between the two companies. 

Seventy-five percent of Tate & Lyle’s revenue in the year ended March 31, 2021, was generated from manufacturing facilities that will remain under its own control.

In the financial year ending March 31, 2021, on a proforma basis, NewCo generated revenues of £1.7 billion (US$2.3 billion) and an adjusted operating profit of £165 million (US$229 million). As of March 31, 2021, NewCo had gross assets of £1.3 billion (US$1.8 billion).

Next phase of evolution 
According to Hampton, the announcement represents the next phase in the evolution of Tate & Lyle.

“Our one strong company will become two stronger businesses, both in a position to pursue new and exciting growth opportunities in their respective markets. Building on the strong platform established over the last three years, the proposed transaction will transform Tate & Lyle into a purpose-led, global F&B solutions business, serving faster-growing specialty markets.”

With its focus and a step-up in R&D investment, innovation and solutions development, Tate & Lyle will be able to enhance how it serves its customers and accelerate growth significantly. 

“Our deep scientific expertise, unique product portfolio and leading technical capabilities in sweetening, mouthfeel and fortification, position us very well to benefit from growing consumer demand for food and drink that is lower in sugar, calories and fat, and with added fiber,” continues Hampton. 

In April, Tate & Lyle confirmed that it was in the process of exploring the potential to separate its Food & Beverage Solutions and Primary Products businesses, through a sale of a controlling stake in its Primary Products business to a new long-term financial partner. 

The company recently launched a sustainability program to enable stevia growers in China to lower their environmental impact and gain more significant economic benefit from producing this no-calorie sweetener.