The 150-year-old British sweeteners and ingredients group Tate & Lyle has confirmed it is in advanced discussions with the American food science giant Ingredion over a possible £2.7 billion cash takeover, a move that, if completed, would lift another household name off the London market and forge a transatlantic ingredients heavyweight valued at more than $10 billion (£8 billion).
The FTSE 250 company said on Thursday that the Illinois-headquartered suitor had tabled a conditional 615p-a-share proposal, comprising 595p in cash and up to 20p in dividends. That represents a punchy 64 per cent premium to Tate & Lyle’s closing price the previous evening and prompted an immediate scramble in the stock, which jumped 45.4 per cent to close at 545p. Even after that one-day surge, the shares remain well shy of the 800p-plus levels they were changing hands at three years ago.
In a brief statement to the London Stock Exchange, Ingredion confirmed it had lodged the offer and said it “believes a potential transaction would deliver significant benefits to customers, consumers, employees and Ingredion shareholders”. The Westchester, Illinois-based business added that it was “engaged in discussions and a period of due diligence with Tate & Lyle to further explore a potential transaction. Discussions are ongoing, and there can be no certainty that a binding offer will be made.”
Under City Takeover Panel rules, Ingredion has until 5pm on 11 June either to put a firm offer on the table or to walk away. Tate & Lyle’s board has indicated that the latest approach is one of a series of overtures from the same suitor, and stressed there is no guarantee that a binding bid will materialise.
A price the board will struggle to dismiss
For a company that has spent the past two years grappling with softer bakery demand in the United States, weaker European pricing and stubbornly high input costs, the timing is awkward — and the price is generous. Shares in Tate & Lyle have underperformed those of its American suitor over the past 12 months, leaving the board with little obvious cover for digging in.
Lucinda Guthrie, head of mergers and acquisitions research firm Mergermarket, said the proposal sat at “a level that the board would have to consider”, adding that the public disclosure “will act as a price discovery mechanism to see if a deal can be struck.”
A combination would marry Tate & Lyle’s expertise in low- and no-calorie sweeteners, including the sucralose used in Coca-Cola’s diet ranges — with Ingredion’s broader portfolio of starches, texturisers and plant-based ingredients. Both groups view the United States, where consumers are increasingly steering towards low-calorie drinks and reformulated packaged foods, as their single most important market.
From victorian sugar cubes to silicon-age science
Tate & Lyle’s roots reach back into Victorian Britain, when sugar refiners Henry Tate and Abram Lyle built up rival operations on opposite banks of the Thames. Tate is credited with introducing the sugar cube to the UK in 1875, while Lyle, refining cane sugar in east London, discovered the viscous byproduct he later canned as Lyle’s Golden Syrup.
The instantly recognisable green-and-gold tin, featuring bees emerging from the carcass of a lion in a nod to the biblical riddle of Samson, was entered into the Guinness Book of Records in 2006 as the world’s longest unchanged commercial brand packaging. The two refining houses formally merged in 1921, shortly after the deaths of their founders.
The modern Tate & Lyle bears little resemblance to that Victorian sugar giant. After diversifying through the 1970s, the company eventually sold its sugar refining business, including the historic Plaistow Wharf refinery in London’s Docklands, to American Sugar Refining in 2010, along with the rights to use the Tate & Lyle name on retail sugar packets. What remains in London is a leaner, business-to-business food science group that helps multinational manufacturers cut salt, fat and sugar from their products.
Another london name in foreign sights
The approach lands at a sensitive moment for the City. With more than 30 companies having delisted or announced plans to leave the London exchange this year, much of it driven by private equity and overseas industrial buyers, a Tate & Lyle exit would only sharpen the debate about the steady drift of UK plc into foreign ownership and the wider London market exodus.
It also comes against a backdrop of broader fragility in corporate Britain. Business Matters has previously reported on the record wave of business closures amid a tough operating environment and on the £300 million pulled by investors from UK equities amid inheritance tax fears — trends that have left mid-cap names such as Tate & Lyle particularly exposed to opportunistic offshore bidders.
For its part, Ingredion is hardly a stranger to the global ingredients game. The New York-listed group employs around 12,000 people, sells into more than 120 countries and traces its own history to the mid-20th century, when National Starch was absorbed into the Corn Products Refining Company to create one of America’s dominant corn refiners. The company markets itself as a business that turns “grains, fruits, vegetables and other plant materials into ingredients that make crackers crunchy, candy sweet, yogurt creamy, lotions and creams silky, plastics biodegradable and tissues softer and stronger” — and which now helps brand owners reformulate their products for health-conscious consumers.
Wider coverage from Bloomberg and Food Dive suggests City advisers expect the bid talks to dominate the agenda at Tate & Lyle’s next round of investor briefings, with hedge funds already piling in on the spread between the offer price and Thursday’s closing level.
Whether or not Ingredion ultimately stumps up a firm offer before the 11 June deadline, the disclosure has already done its work. For shareholders who have watched the share price drift for three years, a 64 per cent premium will be hard to wave away. For the London market, it is another reminder that some of its most historic names are now firmly in play.
Read more:
Tate & Lyle weighs £2.7bn approach from US rival Ingredion