The deal was first announced at the start of this month, following the recent sale of Tate & Lyle sugar businesses in America, which saw a reduction in the need for its physical trade operation.
The working capital in the business will remain with Tate & Lyle until March 31, 2009, at which point, on the deal closing, it will be assumed by Bunge.
The deal reflects the company’s move away from being a commodity processor and trader to focusing more on higher value products.
The confirmation that it has been fully approved was made today by Tate & Lyle’s chairman, Sir David Lees, at the annual general meeting, where he also spoke of a “satisfactory” start to the financial year.
While he said the EU sugar businesses were “operating in a very difficult market”, the food and industrial ingredients divisions were said to be strong, and the volume of sucralose sales has been experiencing “consistent” growth.
Sale to Bunge
The value of the deal has not been revealed, but Tate & Lyle said it would make neither a profit nor a loss from it.
However, in the long term it will enable the company to free itself from the volatile sugar market, that in good years can boost earnings, while in more challenging times can impact the bottom line.
In April and May 2008 Tate & Lyle’s sugar trading unit made £2m (€2.5m) in profits, but this followed rollercoaster figures, with an operating loss of £9m (€11.2m) in the year ending 31 March 2008, and an operating profit of £22m (€27.5m) in the 2007 fiscal year.
Good start to 2008/9 reported despite high prices
Lees said its EU sugar business has been facing challenges amid the introduction of sugar reforms, which introduce quotas to prevent over-production and improve competitiveness in the market. Added to this, gas prices at the UK refinery were higher than the company anticipated.
Lees said: “We are increasingly confident that, during the second half of the financial year, market equilibrium between supply and demand for EU sugar will be restored, which should lead to progressively firmer refining margins.”
In recent years the UK firm has benefited from strong interest by food and beverage makes in its added-value sweetener ingredient sucralose, popular for its strong shelf-life and low calorie appeal.Lees said Tate & Lyle’s sucralose sales continue to experience growth that is “consistent with our capacity utilisation targets”, however, sales values increased at a lower rate.
While the sector endured high energy costs, these were offset by efficiency costs, he said.
The European division of its food and industrial ingredients sector also suffered from high energy prices, according to the company, but this has been compensated by improved co-product prices.
Meanwhile, its American division has benefited from improved by-product returns driven by high corn prices. However, these were somewhat offset by additional costs put to the commissioning of new technology at its corn wet mill in Louton, Tennessee.