Tate & Lyle to acquire CP Kelco to propel growth in specialty food and beverage solutions

Tate & Lyle PLC has announced a definitive agreement to acquire CP Kelco, a leader in the production of pectin, specialty gums, and other nature-based ingredients. The deal, valued at approximately $1.8 billion (£1.4 billion), encompasses the entire issued share capital of CP Kelco U.S., CP Kelco China, and CP Kelco ApS, along with their subsidiaries. This acquisition from J.M. Huber Corporation marks a significant step in Tate & Lyle’s strategic transformation towards becoming a growth-focused specialty food and beverage solutions provider.

The transaction is structured with a headline consideration at completion of $1.8 billion, subject to customary adjustments. This includes $1.15 billion in cash from new and existing debt facilities and cash resources, and the issuance of 75 million new Tate & Lyle ordinary shares to Huber with an implied value of approximately $645 million. An additional deferred consideration involves up to 10 million Tate & Lyle ordinary shares, contingent on performance criteria.

The acquisition is a strategic fit for Tate & Lyle, complementing its existing capabilities in Sweetening, Mouthfeel, and Fortification. It is expected to accelerate revenue growth and enhance adjusted EBITDA margins, significantly impacting Tate & Lyle’s financial landscape over the coming years.

The combination of Tate & Lyle and CP Kelco is projected to yield at least $50 million (£40 million) in cost synergies by the end of the second full financial year post-completion. Moreover, the synergy potential extends to revenue growth, with up to 10% of CP Kelco’s revenue expected over the medium term. This acquisition is poised to expand Tate & Lyle’s market presence significantly in the $19 billion specialty food and beverage ingredients sector, which is growing at a 6% CAGR.

The deal not only reflects Tate & Lyle’s commitment to innovation and sustainability but also strengthens its position in a competitive market, driven by increasing consumer demand for healthier, tastier, and more sustainable food options. The combined entity will leverage enhanced R&D capabilities and a broader product portfolio to meet evolving consumer preferences worldwide.

Nick Hampton, CEO of Tate & Lyle, emphasized the strategic alignment and shared values between the companies, highlighting the enhanced customer proposition and significant growth opportunities. Didier Viala, President of CP Kelco, also expressed enthusiasm about the merger, noting the combined business’s potential to drive value and innovation.

Gretchen W. McClain, President & CEO of J.M. Huber Corporation, commented on the strategic nature of the merger, underlining its potential to unlock new value and foster long-term growth in the food and beverage sector.

The transaction, classified as a Class 1 transaction under UK Listing Rules, is set for completion in the fourth quarter of 2024, pending customary regulatory and shareholder approvals.

Last month, Tate & Lyle sold its remaining 49.7% interest in Primary Products Investments to KPS Capital Partners for a total cash consideration of USD 350 million (approximately GBP 279 million).