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Tate & Lyle confirms plans to break up the business

·2-min read
Tate & Lyle has had a mixed performance over the last few decades, having slid in and out of the FTSE 100. Photo: Igor Golovniov/SOPA/LightRocket via Getty Images
Tate & Lyle has had a mixed performance over the last few decades, having slid in and out of the FTSE 100. Photo: Igor Golovniov/SOPA/LightRocket via Getty Images

Sweetener business Tate & Lyle (TATE.L) has confirmed weekend reports that it intends to break up its business. 

The FTSE 250 (^FTMC) company has said it is looking to spin out its products segment. 

The primary products business is a big driver of revenue, having generated £1.8bn ($2.5bn) last year. It provides artificial sweeteners and industrial starches such as Sucralose primarily to the North American market

Reports over the weekend in The Sunday Telegraph speculated it could be worth as much as £1.2bn and that US fund duo Apollo Global Management and Cerberus had entered the talks. 

The business said in a statement to investors that "discussions with potential new partners in the Primary Products business are at an early stage" and that "there can be no certainty that a transaction will be concluded."

"A further announcement will be made as and when appropriate."

Shares in the firm briefly fell 0.6% on market open in London before jumping as much as 6.8%. 

READ MORE: UK roadmap out of lockdown fuels record rebound in consumer confidence

The company has had a mixed performance over the last few decades, having slid in and out of the FTSE 100 (^FTSE). In 2014, it dropped out of the FTSE 100 for the 12th time in 23 years and has been dubbed a "yo-yo" company. 

The share price jumped shortly after the opening bell in London. Chart: Yahoo Finance UK
The share price jumped shortly after the opening bell in London. Chart: Yahoo Finance UK

The carveout could be a tricky manoeuvre as it has many shared customers and assets with other segments such as its food and beverage arm. 

The Telegraph reported over the weekend that sources say Tate & Lyle has been working with Deloitte for over a year to find a good way of making the disposal.

Analysts at Barclays wrote in a Monday morning note the move would "make Tate a much more enticing investment proposition and we share Tate’s Board view that this could be a catalyst for significant shareholder value creation."

It also said it considers it to be "one of the most compelling valuation opportunities within our Ingredients coverage."

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