British food company Tate & Lyle has revealed it is planning on breaking itself up to focus on healthier foods following news that it is to sell off its sweetener arm.
Tate & Lyle is planning on selling its sweetener arm to focus on healthier foods and mulling a break-up to focus on its priorities. Credit: Mike Roberts / Flickr
Shares in Tate & Lyle rose after news broke that the company was looking to sell its controlling stake in its commercial sweeteners division and separate it from its food and beverage sector.
Read more: UK government face backlash over inconsequential sugar cuts
Sugar cuts in Britain have become a major part of food reform in the nation, following a campaign launched in 2016 by Public Health England.
However, sugar cuts made via legislation have been relatively inconsequential, with a study released last year revealing only around 3% has been cut from products.
The food firm's sweetener division makes up part of its primary products division and represents the company largest source of sales, with a reported £1.8 billion (€2.07 billion) in revenue last year.
The company also sold its sugar business back in 2010.
In a statement released yesterday, the company said it would continue to focus on its priorities and remains positive regarding future growth.
It added: "The Board believes that if a transaction of this nature was completed it would enable Tate & Lyle and the new business to focus their respective strategies and capital allocation priorities and create the opportunity for enhanced shareholder value.
“Discussions with potential new partners in the Primary Products business are at an early stage and therefore there can be no certainty that a transaction will be concluded.”
The Telegraph report the sale could be worth up to £1.2 billion (€1.38 billion).
Commenting on the deal, AJ Bell investment director Russ Mold admitted it was "becoming increasingly fashionable" to break up larger businesses, particularly those with conglomerate structures.
He said: "There are quite a few companies like Tate & Lyle which have fingers in many pies. While they might be making good money, splitting a business into different parts each with separate management can see a tighter focus and ultimately even stronger gains.
"Tate & Lyle’s potential move to sell a controlling stake in its artificial sweeteners and industrial starches arm could mean it gets a cash injection that can be used to pay down debt and reinvest in the business to make it more competitive, as well as the ability to focus more attention on its food and beverages arm."
He also said private equity companies are sitting on large amounts of cash, adding they are becoming "more creative with deploying those funds to make future returns. Rather than making outright acquisitions, buying parts of businesses can be a good move as it can unlock hidden value."
"Keeping a minority stake in the sweeteners arm would also mean it benefits from any upside and provides an option to sell that holding at a future date, potentially for an even greater price than if it had sold out completely in one go," he added.
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