Tate & Lyle preparing for a breakup and sale of its primary products division – the biggest source of sales
- Group in talks to sell controlling stake in its commercial sweeteners unit
- Last year, the division brought in revenues of £1.8bn; it could be worth £1.2bn
- It would separate it from its food and beverages division
- Tate & Lyle sold its sugar business, which included Lyle’s Golden Syrup, in 2010
Sweeteners giant Tate & Lyle is preparing for a breakup and sale.
The firm yesterday confirmed it is looking at the potential separation of its primary products division, the biggest source of sales, following a press report.
It sold its sugar business – which included Lyle’s Golden Syrup – in 2010.
Breakup: Tate & Lyle sold its sugar business – which included Lyle’s Golden Syrup – in 2010
The primary products division sells artificial sweeteners used in soft drinks and industrial starches and brought in revenues of £1.8billion last year.
It is thought to be worth more than £1.2billion. The food and beverage solutions division boasts annual sales of about £942million.
Tate confirmed it was ‘in the process of exploring the potential to separate its food and beverage solutions and primary products businesses through a sale of a controlling stake in its primary products business’.
It said the split would allow the businesses to better focus on their own priorities, adding that discussions with ‘potential new partners’ were at an early stage.
Shares in the FTSE 250 listed group jumped 6.5 per cent to 805.68p in early trading on Monday.
Russ Mould, investment director at AJ Bell, says it is becoming increasingly fashionable to break up large businesses – particularly those with conglomerate structures – as it can result in stronger gains for the company.
Shares in Tate & Lyle rose 7% in early trading following the news
‘Private equity companies are sitting on large amounts of cash and they are becoming more creative with deploying those funds to make future returns. Rather than making outright acquisitions, buying parts of businesses can be a good move as it can unlock hidden value,’ he said.
‘These are quite a few companies like Tate & Lyle which have fingers in many pies. While they might be making good money, splitting a business into different parts each with separate management can see a tighter focus and ultimately even stronger gains.
‘Tate & Lyle’s potential move to sell a controlling stake in its artificial sweeteners and industrial starches arm could mean it gets a cash injection that can be used to pay down debt and reinvest in the business to make it more competitive, as well as the ability to focus more attention on its food and beverages arm.
‘Keeping a minority stake in the sweeteners arm would also mean it benefits from any upside and provides an option to sell that holding at a future date, potentially for an even greater price than if it had sold out completely in one go.’