Tate & Lyle is selling its EU sugar refining operations to American Sugar Refining, the largest cane sugar refiner in North America, for £211m in cash. The deal reflects the change in development strategy adopted by Javed Ahmed, the new chief executive of Tate & Lyle.
EU S consists of the cane sugar refineries in London, UK, and Lisbon, Portugal, the Lyle’s Golden Syrup factory in London, the associated sugar and syrup brands and the Tate & Lyle Process Technology consulting business. In the year ended 31st March 2010, these businesses had external sales of £689m and made an adjusted operating profit of £14m (after transitional aid of £17m), and had gross assets of £374m at 31st March 2010. The sale excludes historic UK pension assets and liabilities and is expected to give rise to a book loss on disposal, before costs, of approximately £55m, subject to exchange rate movements and the timing of completion.
In May, Tate & Lyle announced its clear intentions to ‘focus, fix and grow’ its business. The sale of the EU sugar operations is intended to achieve in a more focused, less volatile business, and a solid platform to deliver sustainable long-term growth in Tate & Lyle’s speciality food ingredients business, supported by cash generated from its bulk ingredients activities.
The transaction is expected to be neutral to Tate & Lyle’s adjusted earnings per share on total operations in the 2011 financial year. The completion of the transaction, which is conditional upon anti-trust clearance in Portugal, is expected to occur in approximately two months.
Tate & Lyle has provided American Sugar Refining with a perpetual worldwide licence to use the Tate & Lyle brand in connection with the retail sale of sugar and in other limited circumstances.
Tate & Lyle is also looking to sell the remaining businesses within its sugars division, principally Molasses and Vietnamese sugar.
“Sugar refining has enjoyed a long and proud history within Tate & Lyle, but we believe the interests of this business and its employees are now best served by being part of a company for whom sugar refining is core,” says Javed Ahmed, chief executive of Tate & Lyle. “Tate & Lyle’s clear priority is to grow its speciality food ingredients business, supported by cash generated from bulk ingredients. This disposal will enable us to concentrate our resources on delivering our strategic objectives as we focus, fix and grow our business.”
The acquisition marks the third large-scale transaction between the two companies. ASR purchased Tate & Lyle North American Sugars (Domino Sugar) and its three refineries in 2001. More recently, ASR acquired Tate & Lyle Canada. (Redpath Sugar) in 2007, which included Canada’s largest refinery. ASR’s expertise lies in the operation of cane sugar refineries and the logistics of the related supply chain as well as the marketing of recognised retail sugar brands.
“Sugar is a global business,” points out Antonio Contreras, Jr, co-president of ASR. “This acquisition makes perfect sense for ASR. We’re sugar people who are committed to and understand the sugar business. The European acquisition in many ways mirrors our North American operations and will complement our company.”