World Business

Sweet deal ends era for Tate & Lyle

By Thomas Biesheuvel (China Daily)
Updated: 2010-07-02 10:25

UK firm sells off refineries to US company for $315 million

LONDON - Tate & Lyle Plc, once the world's biggest sugar processor, is selling its refineries in the European Union to American Sugar Refining Inc as the UK company dismantles a 132-year-old industry to focus on more profitable businesses.

In a transaction echoing the sale of Britain's iconic Cadbury chocolate brand to Kraft Foods Inc, Tate said that it will receive 211 million pounds ($315 million) for the sites. The British company will be left with Splenda, the world's second-largest low-calorie sweetener, and a global additives and ingredients business.

The retreat from an industrial empire founded by Henry Tate, benefactor of London's Tate Gallery, comes nine months after Javed Ahmed, 50, took over as chief executive officer. Ahmed said the company's priority is to expand in food ingredients used in Kraft and Kellogg Co products and which accounted for 66 percent of earnings last year.

The sale of Cadbury Plc, founded in 1824, to Northfield, Illinois-based Kraft in January led to a campaign to "Keep Cadbury British" by the Mail on Sunday newspaper and saw the then UK Business Secretary Peter Mandelson describe the company as an iconic brand.

The sale of Tate's sugar business, which includes its Golden Syrup brand first tinned in 1885, is a "different proposition", said Investec Securities analyst Martin Deboo by phone from London.

Unlike Cadbury, Tate had a "facade of an iconic brand concealing a broken economic model", he said. Tate is "essentially a corn refining business in North America".

Shares in Tate rose 14.7 pence, or 3.3 percent, to 464.4 pence at 9:41 am in London, giving the company a market value of 2.1 billion pounds.

Tate has been selling businesses and closing plants since the European Union cut sugar-production quotas, moving its focus to higher-margin products, including food ingredients and sucralose sweeteners. Tate sold its Canadian sugar unit to American Sugar Refining in 2007 for 132 million pounds and then in 2008 its international sugar business to Bunge Ltd.

Tate, which started refining sugar at its London site in 1878, is selling its refineries in Portugal and the UK and its Golden Syrup factory in London.

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The sale price excludes pension assets and liabilities in the UK, and will result in a book loss of about 55 million pounds, Tate said in its statement.

"The transaction is expected to be neutral to the group's adjusted earnings per share on total operations in the 2011 financial year," it said.

"It's a very sweet deal," said Investec's Deboo. "We'd have been happy to see them exit it on a dilutive basis," probably by closing the business and selling the land, he said. "Instead they're selling it as a going concern for considerably more than we expected."

Tate now plans to sell its remaining sugar operations, including its Vietnamese unit and its molasses assets, Ahmed said.

Bloomberg News