Tate & Lyle confirms starch sale to Syral
the sale of part of its European starch ingredients business for
€310m, which will make it more secure in volatile markets and in
context of the new European sugar regime.
The British ingredients company announced in May that it was in advanced and exclusive discussions with Syral, a subsidiary of France's Tereos, to sell off the UK, Belgium, France, Spain and Italy operations of its Food and Industrial Ingredients, Europe division (TALFIIE). The deal excludes Tate and Lyle's operations in Koog, The Netherlands - its main corn-based starch production site in Western Europe - Morocco, and its Eaststarch joint venture (Hungary, Slovakia, Bulgaria, Romania and Turkey). The divestment - which remains subject to antitrust approval - is the most decisive move yet in the company's repositioning towards value-added ingredients. Since TALFIIE, which is almost entirely based around sweeteners and starches, is commodity-based, it does not have a place in this strategy. TALFIIE's Belgian entity includes the head office, shared service centre and billing entity, which is also excluded from negotiations, some restructuring measures will now need to be put in place. Yesterday Goldman Sachs, a broker, said it is expecting the firm to confirm a share buyback using proceeds from the sale to Syral at the Annual General Meeting in London today. Goldman Sachs also upgraded Tate & Lyle from 'hold' to 'buy' as it expects its high fructose corn syrup business to do well out of falling prices for US corn, thanks to a higher crop in 2008. The news of the Syral agreement was announced in Tate & Lyle's trading update, issued today, in which it said trading for the financial year so far has been in line with operating profit expectations, but profits from the Ingredients division have been "somewhat below last year".