Tate & Lyle believes that a backlash towards ultra-processed foods will present a “big chance” for it to make its largest acquisition ever of an ingredients company. The deal, it claims, will help it create healthier and tasty products.
The UK company announced on Thursday that it had purchased CP Kelco a supplier of pectins and specialty gums from US chemicals group JM Huber for $1.8bn in a cash-and shares deal.
Tate & Lyle stated that strengthening their so-called “mouthfeel” solutions — the ingredients that create texture and taste in foods — would allow it to create healthier versions of more products.
Nick Hampton, the chief executive of Atlanta-based CP Kelco, argued that ultra-processed food (UPFs), was a problem because they were lacking in nutritional value and not the processing itself. CP Kelco’s technologies could help them create new products that addressed this.
Hampton stated that he saw the backlash as an opportunity to grow his business. It’s difficult to argue that many ultra-processed foods sold today are nutritionally balanced. . . The acquisition is about expanding capability, and making us a more valuable partner to our customers.”
Tate & Lyle, which produces sweeteners like Splenda, and ingredients such starches and sugar, will be able to offer fruit-based versions for low-fat and low-calorie yoghurts. Hampton stated that the deal will also improve the formulation for products containing the ingredients, like creating ketchup with less sugar.
He acknowledged, however, that the deal will also help Tate & Lyle serve new categories, such as confectionery.
Hampton’s comments come as UPFs are increasingly under scrutiny, including flavoured yogurts, prepared meals, and sweet snacks. A growing body of research has linked them to obesity and cancer.
Hampton argues that processed food will play a crucial role in feeding an ever-growing population in a sustainable and affordable way, while also being more nutritious.
JM Huber, a family-owned company, will be a long-term Tate & Lyle shareholder with a 16.5% stake. It also has the right to appoint up to two non-executive board members.
Tate & Lyle will be able to expand its presence in key growth markets, such as Asia, Africa, the Middle East, and Latin America. These regions account for 60 percent of the global population.
Analysts from Barclays stated that the deal was “a good match in terms of scope, size and a reasonable multiple of valuation”, but also added that “the markets will want reassurance” that recent volume declines and margin pressures at CP Kelco are cyclical and not structural.
Tate & Lyle shares fell up to 12.3% before recovering partially in the afternoon.
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