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Tate & Lyle has signed an agreement to acquire Quantum Hi-Tech (Guangdong) Biological Co, a prebiotic dietary fibre business in China for US$237m (£180m).

Quantum, currently owned by ChemPartner Pharmatech, engages in the research, development, production and sale of fructo-oligosaccharides (FOS) and galacto-oligosaccharides (GOS).

Together, FOS (from sucrose) and GOS (from milk sugar/lactose) represent around 25% of the global dietary fibres market which is forecast to grow at around 6% each year.

In China, which currently represents the majority of Quantum’s sales, the FOS and GOS market is forecast to grow at around 10% per annum.

Tate & Lyle said the acquisition “significantly strengthens” its position as a global player in dietary fibres, bringing a high-quality portfolio of speciality fibres, strong R&D capabilities and proprietary manufacturing processes and technologies.

The acquisition expands Tate & Lyle’s ability to provide added-fibre products for its customers across a range of categories including dairy, beverages, bakery and nutrition (including infant nutrition), and to meet growing consumer interest in gut health.

It also significantly expands Tate & Lyle’s presence in China and Asia, and extends its capabilities to create further products across food and drink utilising its speciality ingredient portfolio.

For the 11 months ended 30 November 2021, Quantum generated revenue of US$46m and EBITDA of US$14m.

The acquisition is expected to be accretive to revenue growth and EBITDA margin for Tate & Lyle in the first year of ownership.

The transaction is subject to approval by the shareholders of ChemPartner, a public company listed in China, and is expected to close in the second quarter of 2022.

Tate & Lyle CEO Nick Hampton commented: “We are delighted to announce the agreement to acquire Quantum, a leader in prebiotic dietary fibres and a business recognised for its high-quality ingredients and solutions.

“This acquisition significantly strengthens our fortification capabilities and expands our customer offering in key food and drink categories. FOS and GOS are highly complementary to our existing fibre portfolio and will enable us to offer a broader range of solutions to our customers. The acquisition is also very much in line with our purpose to support healthy living by improving gut health, and driving sugar and calorie reduction and fibre fortification for consumers across the world.”

Zeng Xianwei, chairman of the board of ChemPartner, said: “We are proud of the Quantum business we have built over the last 20 years, providing high-quality products to support healthier living for people across China and beyond.

“Tate & Lyle, with its global customer reach, strong focus on R&D, and strong fibre portfolio, is the ideal company to take Quantum on the next stage of its development. I wish them and the management team at Quantum success in the future.”

Tate & Lyle shares are up 3.6% on the news to 745.3p.

Morning update

NWF Group, the specialist distributor of fuel, food and feed across the UK, has raised expectations for its current year ending 31 May.

Following the positive trading update announced on 8 March 2022, the group has continued to outperform and as a result the board now anticipates full year results will be “significantly” ahead of the revised expectations.

This has been led by the fuels business as a result of exceptional circumstances, with the very significant short-term volatility in oil prices and a supply constrained UK fuel market.

The group’s shares have jumped 6.5% to 237.4p on the news.

On the markets this morning, the FTSE 100 is up another 0.2% to 7,592.3pts.

Early risers include Bakkavor, up 4.7% to 115.2p, McColl’s up 3.4% to 2.12p, and B&M European Value Retail, up 1.9% to 551.6p.

Fallers include Parsley Box, down 4.8% to 20p, Sainsbury’s, down 1.5% to 257.4p and Associated British Foods, down 0.9% to 1,715p.

Yesterday in the City

The FTSE 100 ended the day up 0.6% to 7,578.8pts.

However, there were a number of mid-cap consumer fallers, with Pets at Home down 5.8% to 373.2p, SSP Group, down 4.9% to 240.7p, Bakkavor, down 4.8% to 110p, FeverTree down 4.7% to 1,776p, WH Smith, down 4.7% to 1,470p, DS Smith, down 4.4% to 326.8p, Deliveroo down 3.9% to 120p and McBride down 3.4% to 42.5p.

The few risers included supermarkets Sainsbury’s, up 1.4% to 261.3p, and Tesco, up 0.9% to 282.9p.

Other risers included Hotel Chocolat, up 2.3% to 450p, Naked Wines, up 1.7% to 368.5p, British American Tobacco, up 0.7% to 3,242p and Unilever, up 0.5% to 3,548p.

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