Tate & Lyle’s future on the London Stock Exchange looked uncertain this morning as speculation emerged of a potential takeover by US private equity house Advent International.
The Boston-based buyout firm is in the early stages of preparing a bid for the ingredients supplier, according to The Financial Times, which attributed the news to two people with direct knowledge of the matter.
Although there is no certainty an offer will be made, if it goes ahead, a bid is expected to be higher than Tate & Lyle’s £2.8bn market value.
Shares in Tate & Lyle rocketed yesterday afternoon on the speculation, climbing almost 12% before ending the day 8.3% higher at 807p, which valued the group at £3.2bn.
Tate and Advent have not commented on the rumours, with no response from Tate on the London Stock Exchange.
The potential approach from Advent comes after Tate completed its transformation into a speciality food and beverage ingredients business.
The group, which helps food and drinks manufacturers reformulate products, sold off its remaining stake in its commercial sweeteners division to KPS Capital Partners in May.
CEO Nick Hampton called the sale “an important milestone” for the group.
It followed up the move with a proposed $1.8bn combination with CP Kelco, which makes pectin, speciality gums and other nature-based ingredients.
Tate said the deal significantly accelerated its strategy to continue capitalising on the drive for healthier products as F&B producers seek to reduce sugar, salt and fat,
“It was only a question of time before someone pounced on the business following its radical restructuring,” said AJ Bell investment analyst Dan Coatsworth.
“Without the baggage, Tate & Lyle had the right ingredients to become a leaner and healthier business and that appears to have put dollar signs in Advent’s eyes.”
He added that mixed market reaction to the CP Kelco deal “confused” the strategy of slimming down the portfolio and left the door open for Advent to “run the numbers” while Tate’s management were busy finalising the acquisition.
“Pouncing on a business when it is distracted is par for the course with private equity and the big question now is whether Advent is prepared to offer a fair price to win over shareholders.”
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