Yahoo Finance Tate & Lyle pursues break-up through sweeteners stake sale
Tate & Lyle has begun preparing the ground for a break-up of the business by auctioning a controlling stake in its primary products arm.
The former FTSE 100 company confirmed it was pursuing a split of the unit from the food and beverage solutions business following revelations in The Sunday Telegraph.
In a statement, the business said it was exploring a separation by selling a controlling stake in the primary products operation to a "new long-term financial partner".
"Tate & Lyle continues to successfully execute its strategy and remains confident in the future growth prospects of the company," the firm added.
"However, the board believes that if a transaction of this nature was completed it would enable Tate & Lyle and the new business to focus their respective strategies and capital allocation priorities and create the opportunity for enhanced shareholder value."
Primary products generated more than £1.8bn of revenues last year. It provides commodities such as artificial sweeteners and industrial starches, mainly for the North American market.
US fund duo Apollo Global Management and Cerberus are among the parties to have held talks with Tate & Lyle bosses and advisers Bank of America and Citi about the company’s biggest single division, according to City sources.
With operating profit of £158m, analysts estimated the division could be worth more than £1.2bn.
However, they warned that carving the division out would be fraught with difficulty because it shares customers and assets with the food and beverage arm.
That operation makes more profit on lower sales by selling to the likes of Cadbury owner Mondelez and PepsiCo.
It is understood Tate & Lyle had been working with Deloitte for more than a year to find the best way of spinning off the division.
Tate & Lyle said talks with potential investors in the primary products arm were "at an early stage" and there was "no certainty" the stake sale would go through.
Sugar merchant Sir Henry Tate started out in 1859. His business was merged with Bernard Lyle & Sons in 1921 to form Tate & Lyle.
