Tate & Lyle expands ingredients empire
UK group's strategy of achieving a truly diverse added value
ingredients portfolio.
The capture of US firm Continental Custom Ingredients (CCI) and the Italy-based Cesalpinia group of companies is expected to be completed by the first quarter of the 2006 calendar year for £74 million.
"These bolt-on acquisitions are an excellent fit with Tate & Lyle's stated growth strategy," said Iain Ferguson, Tate & Lyle's chief executive.
"They represent a further step in broadening our product mix, technology and customer base in rapidly expanding areas such as blends and fortification."
They also illustrate how Tate & Lyle is moving away from commodity markets and towards value-added solutions. Reform of the EU sugar regime has made sugar production within the EU significantly more difficult, and sector leaders such as Tate & Lyle have been looking to develop more profitable aspects of their businesses.
At last week's FiE show in Paris for example, the group was keen to emphasise its role not as a commodity supplier but as an ingredients solutions provider.
The firm's newly launched CORE business model - which stands for Create, Optimise, Rebalance and Enrich - is designed to achieve this evolution towards becoming a more flexible and responsive business partner.
CCI is based in Illinois, US and has operations in Mexico and Canada. The firm is a leader in dairy stabilisers and emulsifier systems and works closely with customers to develop ingredient systems for the North American market.
CCI also has expertise in beverage flavours and vitamin and mineral fortification. The consideration payable on closing will be £40 million, made up of cash of £36 million plus assumption of CCI net long term debt estimated at £4 million.
The acquisition is expected to cover Tate & Lyle's cost of capital in the first full year of operation.
The acquisition of Cesalpinia Foods expands Tate & Lyle's knowledge of stabilising systems and gums and further enhances its expertise in providing solutions for key target markets such as dairy, soups, sauces and dressings.
Cesalpinia Foods will be reported as part of Tate & Lyle Food & Industrial Ingredients, Europe. The acquisition is expected to cover Tate & Lyle's cost of capital in the second full year of operation.
"These businesses bring expertise in dairy, gums and custom formulation and will complement Tate & Lyle's broad product range, operational scale and sophisticated research capabilities," said Ferguson. "Together we will be more responsive in developing distinctive and innovative solutions for the food industry as part of our value added growth strategy."
