Global ingredient supplier Tate & Lyle today (July 12) announced it's splitting into two companies, essentially spinning off its commodity ingredients business into a new company controlled by an equity firm.
The Tate & Lyle name will remain on the business "focused on faster growing speciality markets." Tate & Lyle is selling a controlling stake in a new company, at the moment called NewCo, comprising its Primary Products business in North America and Latin America and its interests in the Almidones Mexicanos S.A de C.V and DuPont Tate & Lyle Bio-Products joint ventures to KPS Capital Partners LP.
Tate & Lyle and KPS will each own 50% of NewCo with KPS having board and operational control. KPS, headquartered in New York, "is known for its ability to execute complex corporate carve-out transactions on a global scale."
NewCo will immediately be "a leader in plant-based products for the food and industrial markets." But those those are ancient businesses and products, such as:
- Grain elevator network and bulk transfer stations in North America.
- Corn wet mills in Decatur, Ill. (the home of Tate & Lyle predecessor A. E. Staley), Lafayette, Ind., and Loudon, Tenn.
- Acidulants plants in Dayton, Ohio, Duluth, Minn., and Santa Rosa, Brazil.
- 50% shareholdings in joint ventures Almex in Guadalajara, Mexico, and Bio-PDO, in Loudon, Tenn.
Primary Products' European operations, which in aggregate represented approximately 5% of Primary Products revenue, are not included in NewCo and will remain with Tate & Lyle.
The structure values NewCo at approximately $1.7 billion. Tate & Lyle expects to receive gross cash proceeds of approximately $1.3 billion, with half a billion returned to Tate & Lyle's shareholders in a special dividend and share consolidation. The balance will be retained to strengthen Tate & Lyle's balance sheet and to provide flexibility to invest to accelerate growth.
"With our new focus and a step-up in R&D investment, innovation and solutions development, we will be able to significantly enhance how we serve our customers, and accelerate growth," said Tate & Lyle CEO Nick Hampton. "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 fibre."
Completion is expected in the first quarter of the 2022 calendar year subject to approval by Tate & Lyle's shareholders and other details.