Tate & Lyle has signed an agreement to divest a controlling stake in a new company and its Primary Products business in the Americas to New York-based private equity firm KPS Capital Partners.

The deal also includes its interests in the Almidones Mexicanos and DuPont Tate & Lyle Bio-Products Company joint ventures (JVs).

Tate & Lyle expects to get gross cash proceeds of $1.3bn, resulting in net cash proceeds of around $1.2bn following customary adjustments and transaction costs.

As part of the agreement, KPS and Tate & Lyle will establish a new firm called NewCo, in which they both own a 50% interest while KPS will hold board and operational control.

The deal values the entirety of NewCo at an enterprise value of approximately $1.7bn

Subject to customary closing conditions and approvals, closure of the deal is expected in Q1 2022.

The Primary Products business is engaged in the production of nutritive sweeteners, industrial starches, acidulants and other corn-derived products in North America and Brazil.

Its corn-derived products are used in carbonated beverages, confectionery products, and packaging applications.

With a workforce of nearly 1,700 employees, the Primary Products business has six manufacturing facilities in the US and Brazil, as well as generates annual revenue of approximately $2.3bn.

KPS co-founder and co-managing partner Michael Psaros said: “KPS is excited to make a controlling investment in the Primary Products Business and is honoured to partner with Tate & Lyle.

“KPS and Tate & Lyle have complete alignment of interests and have cemented a partnership based on shared values such as the safety of our employees 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.”

Tate & Lyle chief executive Nick Hampton said: “This 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.”

For this transaction Paul, Weiss, Rifkind, Wharton & Garrison is serving as legal counsel to KPS and its affiliates while Barclays is acting as financial adviser to KPS.

The debt financing for the transaction is also being led by Barclays, BNP Paribas, Goldman Sachs & Co., Rabobank and Wells Fargo.