NOT FOR RELEASE,
PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART IN, INTO OR FROM
ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE
RELEVANT LAWS OF SUCH JURISDICTION
THIS ANNOUNCEMENT
CONTAINS INSIDE INFORMATION
FOR IMMEDIATE
RELEASE
20 June 2024
Tate & Lyle
PLC
('Tate
& Lyle')
Proposed combination of Tate
& Lyle and CP Kelco to create
a leading global speciality food and beverage solutions
business
Tate & Lyle announces that it has entered into an
agreement to acquire the entire issued share capital of (i) CP
Kelco U.S.; (ii) CP Kelco China; and (iii) CP Kelco ApS together
with each of their respective subsidiaries (together 'CP Kelco'), a
leading provider of pectin, speciality gums and other nature-based
ingredients, from J.M. Huber Corporation ('Huber') for a total
implied consideration of US$1.8 billion
(approximately £1.4 billion)1,
on a cash-free, debt-free basis (the 'Proposed Transaction').
Over the last six years, Tate & Lyle has been
executing a major strategic transformation to become a
growth-focused speciality food and beverage solutions business
aligned to attractive structural and growing consumer trends
for healthier,the cu tastier and more sustainable food and
drink. This transformation has included a much sharper focus
on customers and key categories, increased investment in innovation
and solution selling capabilities, and the significant
strengthening of its Sweetening, Mouthfeel and Fortification
platforms through new product development and acquisitions.
This transformation was completed with the announcement on 23
May 2024 of the proposed sale of Tate & Lyle's remaining
interest in Primary Products Investments LLC ('Primient').
The Proposed Transaction significantly accelerates
Tate & Lyle's strategy to be a leading and differentiated
speciality food and beverage solutions business, and to become the
solutions partner of choice for customers. It is expected to
drive stronger revenue growth and significant adjusted EBITDA margin improvement over the next few
years. It is also expected to be accretive to adjusted
earnings per share, including cost synergies only, in the second
full financial year following completion, and strongly accretive
thereafter.
TRANSACTION
HIGHLIGHTS
· Under the terms of the Proposed Transaction Tate & Lyle
will acquire CP Kelco for total implied headline consideration at
completion of US$1.8 billion (c.£1.4 billion)1, subject
to customary adjustments, consisting of:
-
US$1.15 billion (c.£905 million)1 in
cash from new and existing debt facilities and cash
resources.
-
Issue of 75 million new Tate & Lyle ordinary
shares2 to Huber with an implied value of c.US$645
million3 (c.£510 million).
-
Deferred consideration of up to 10 million
additional Tate & Lyle ordinary shares2 to be
delivered to Huber approximately two years post-completion of the
Proposed Transaction, subject to performance criteria4
based on Tate & Lyle's share price.
· The total implied headline consideration
represents5 10x CP Kelco's adjusted EBITDA for the year
ended 31 December 2023 including run-rate cost
synergies.
· The Proposed Transaction is expected to deliver significant
synergies:
- Targeted run-rate cost synergies of at least US$50 million
(£40 million)1 by the end of the second full financial
year post-completion.
- In
addition, reflecting the strong complementarity of the two
businesses, the combination is expected to generate revenue
synergies of up to 10% of CP Kelco's revenue over the medium term,
underpinning the acceleration in top-line growth of the enlarged
Tate & Lyle.
· Huber will become a long-term shareholder (c.16%)6
in Tate & Lyle following completion. The potential for
Huber to become a long-term shareholder and participate in the
future value creation from the combination of the two businesses
was central to unlocking a transaction. Huber will be entitled to
appoint two non-executive directors to the Tate & Lyle Board
subject to Huber maintaining certain minimum shareholding
thresholds in Tate & Lyle.
· The Proposed
Transaction is expected to complete in the fourth quarter of the
2024 calendar year.
STRATEGIC
RATIONALE
· The Proposed Transaction combines two highly complementary
businesses - Tate & Lyle, a leader in Sweetening, Mouthfeel and
Fortification, and CP Kelco, a leader in pectin and speciality gums
- to create a leading, global speciality food and beverage
solutions business.
· Creates a leader in Mouthfeel, a critical driver of customer
solutions, and strengthens Tate & Lyle's expertise across its
three core platforms of Sweetening, Mouthfeel and
Fortification.
· The combined product portfolio, technical expertise and
complementary category offering delivers a compelling customer
proposition, significantly enhancing Tate & Lyle's solutions
capabilities and increasing the opportunity to benefit from growing
global consumer demand for healthier, tastier and more sustainable
food and drink.
· Expands Tate & Lyle's
offering in its large
(US$19 billion7) and fast-growing (6% CAGR7)
speciality food and beverage ingredients addressable market, and
unlocks further growth opportunities in its core and adjacent
markets.
· Accelerates R&D and innovation through the combination of
world-class scientific, technical and applications expertise,
driving the development of new plant-based ingredients and
solutions.
· The combination is underpinned by a shared purpose, values and
culture, and a mutual belief in Tate & Lyle's commitment to
science, solutions and society.
FINANCIAL
EFFECTS
· The Proposed Transaction accelerates the delivery of Tate
& Lyle's strategy to create a higher growth business
underpinned by an attractive financial algorithm,
including:
- Drive revenue growth towards higher-end of Tate & Lyle's
4%-6% per annum ambition8:
o Industry
growth: Increasing consumer demand
for healthier, tastier and more sustainable food and
drink.
o Broader
offering: Accelerate growth from
complementary portfolios, platforms and categories.
o Stronger
capabilities: Enhanced capabilities to increase innovation and solution
selling to customers.
- Drive significant adjusted EBITDA margin improvement over the
next few years:
o Cost
synergies: Targeted run-rate cost
synergies of at least US$50 million (£40 million) over the two full
financial years following completion.
o Margin
improvement: Phased recovery in
profitability of CP Kelco.
o Solution
selling: Margin accretive solution
selling from two or more years.
- Target to consistently exceed 75% free cash flow
conversion9.
· The Proposed Transaction is expected to be accretive to
adjusted earnings per share, including cost synergies only, in the
second full financial year following completion, and strongly
accretive thereafter.
· Return on invested capital (ROIC) expected to exceed Tate
& Lyle's weighted average cost of capital (WACC) in the fifth
full year following completion.
· Targeted run-rate cost synergies of at least US$50 million
(£40 million) by the end of the second full financial year
following completion, with 50% - 60% (or c.US$25 million) of cost
synergies to be realised by the end of the first full financial
year following completion. The cost to deliver these synergies is
estimated to be around US$75 million. There is also significant
opportunity to accelerate revenue growth and, over the medium term,
we are targeting revenue synergies of up to 10% of CP Kelco's
revenue.
· Net debt to EBITDA leverage anticipated to be approximately
2.3x10 at the financial year-end following completion,
with strong cash generation thereafter. Tate & Lyle
remains within its 1.0x to 2.5x long-term target net debt to EBITDA
leverage range with the capacity and flexibility for further
investment.
· No change to Tate & Lyle's existing approach to capital
allocation and dividend policy; Tate & Lyle remains committed
to maintaining a strong and efficient balance sheet.
· The recently announced US$270 million (c.£215 million) share
buyback programme, previously to follow completion of the sale of
the remaining interest in Primient, will start today.
COMMENTING ON THE
COMBINATION:
Nick Hampton,
Chief Executive, Tate & Lyle said:
"A combination with CP Kelco is the
perfect fit with Tate & Lyle's growth-focused strategy and
purpose. It significantly strengthens our Sweetening, Mouthfeel and
Fortification platforms, enhances our solutions capabilities across
our four core categories, and unlocks new growth
opportunities. Together, we will have a compelling customer
proposition. With our leading portfolio of speciality
ingredients and a world-class team of food science
experts, we will be uniquely placed to provide our customers
with the solutions they need to meet growing consumer
demand for healthier, tastier and more sustainable food and
drink.
We've been collaborating with CP
Kelco on innovation projects for many years and are very aware of
their excellent products and the outstanding capabilities of their
people. We are excited about the opportunities the combination will
create for customers across the world, and the opportunities for
employees in both companies to develop their careers across
a broader global business.
Following on from the announcement of the proposed
sale of our remaining interest in Primient last month, the proposed
combination with CP Kelco represents a significant acceleration of
our growth-focused strategy. It creates a leading, global
speciality food and beverage solutions business, ideally placed to
benefit from the structural trends towards more plant-based,
clean-label and sustainable ingredients and solutions. The growth
potential of the proposed combined business is significant and we
look forward to the future with confidence and excitement."
David Hearn, Chair, Tate & Lyle said:
"Today's announcement represents a major acceleration
in the delivery of Tate & Lyle's growth-focused strategy and
the Board is very excited about the opportunities ahead. Our
strong management team has all the right capabilities to drive
significant value from this transaction for the benefit of our
shareholders, customers and employees. We are delighted that,
looking ahead, Huber will become a new long-term shareholder in
Tate & Lyle. We look forward to welcoming their two new
non-executive directors to our Board, and to working with them, and
our other shareholders, to progress the enlarged company's growth
strategy."
Didier Viala, President, CP Kelco said:
"We are delighted to be joining with Tate & Lyle
to create a leading and differentiated speciality food and beverage
solutions business. CP Kelco and Tate & Lyle are both
highly customer-focused businesses with a shared passion for
science and innovation. With our complementary portfolio and
deep technical expertise, we will bring new value to our customers
and new opportunities for our employees. This is an exciting time
for our combined businesses."
Gretchen W. McClain, President & CEO, J.M. Huber
Corporation said:
"Together, Huber and Tate & Lyle
are taking a bold and strategic move by creating a combined entity
well-positioned with scale to be the driving force behind the
future of food and wellness. Huber has been an excellent steward of
CP Kelco for the past 20 years with a relentless pursuit to growing
and creating value as a leading provider of nature-based, specialty ingredient
solutions. This step unlocks the full value
of CP Kelco and our long-term partnership as a shareholder in Tate
& Lyle signifies Huber's long-term desire to remain engaged in
the attractive food and beverage market. Our collective rich
histories and depth of experience combined with our shared purpose,
values and commitment to our customers, employees, and communities
will enhance future value for all stakeholders."
STEPS TO
COMPLETION
The Proposed Transaction constitutes
a Class 1 transaction for Tate & Lyle under the UK Listing
Rules and is, therefore, as at the date of this announcement,
conditional on the approval of Tate & Lyle's shareholders.
As indicated by the Financial Conduct Authority ('FCA'), the
UK Listing Rules are expected to change in the coming weeks, such
that the requirement for a shareholder vote for a Class 1
transaction would no longer apply. The Proposed Transaction is not
conditional on the approval of Huber's
shareholders.
The Proposed Transaction is
conditional on receipt of certain customary regulatory
approvals. It is expected to complete in the fourth quarter
of the 2024 calendar year.
SHARE BUYBACK
PROGRAMME
On 23 May 2024, Tate & Lyle announced the
intention to return the net cash proceeds of US$270 million (c.£215
million) from the sale of its remaining interest in Primient to
shareholders through an on-market share buyback programme.
Previously, this programme was due to start following completion of
the Primient sale, but it will now start today. We continue
to expect completion of the Primient sale to occur before the end
of July 2024.
----------------------------------------------------------------------------------------------------------
1. Based on GBP:USD
foreign exchange rate of £1:$1.2723, as at 5pm BST on 19 June
2024.
2. Tate & Lyle
shares are ordinary shares with a nominal value of 29 1/6 pence
each.
3. Value of shares based
on Tate & Lyle share price of 677.0p per share as at close of
trading on 19 June 2024.
4. Deferred share
consideration contingent on Tate & Lyle's volume-weighted
average price for the 30 trading days ending on and including the
date that is two years following completion of the Proposed
Transaction, with the full 10 million shares to be issued if Tate
& Lyle's share price over such period is at least £10, and no
deferred share consideration will be payable if Tate & Lyle's
share price over such period is £8.50 or below.
5. Acquisition multiple
calculated based on purchase price of US$1.8 billion, divided by
adjusted EBITDA of US$131 million for the financial year ending 31
December 2023 (in accordance with US GAAP) and US$50 million of
run-rate cost synergies.
6. Based on 401,694,461
shares in issue on 31 March 2024 and including the 75 million Tate
& Lyle shares to be issued to Huber at completion of the
Proposed Transaction.
7. Speciality ingredient
market, market research data, Tate & Lyle and BCG analysis;
estimate value growth 2022-26; CAGR is compound annual growth
rate.
8. Multi-year ambition
to 31 March 2028.
9. Free cash conversion calculated as: free cash flow before
capital expenditure divided by adjusted EBITDA.
10. Leverage
of 2.3x excludes the impact of any liability required to be
recognised in relation to deferred share consideration.
PRESENTATION TO ANALYSTS AND INVESTORS TODAY
Presentation
only
A presentation by Nick Hampton, Chief Executive, Tate
& Lyle, and Dawn Allen, Chief Financial Officer, Tate &
Lyle, will be available to view on our website from 07.00 (BST)
today. To access the presentation, click
here. Please note that
the Q&A will not be accessible via this link.
Presentation and
Q&A
The presentation will be live streamed at 08.30 (BST)
and will then be followed by a live Q&A session with Nick
Hampton, Chief Executive and Dawn Allen, Chief Financial Officer.
To view and listen to this video webcast and Q&A,
click
here.
Please note that only sell-side analysts and any
pre-registered buy-side investors will be able to ask questions
during the Q&A session. Sell-side analysts will be
automatically pre-registered. To pre-register, please contact
lucy.huang@tateandlyle.com.
The archive version of the presentation with Q&A
will be available within two hours of the end of the live
broadcast. To access this version, click
here.
The preceding
summary should be read in conjunction with the full text of the
announcement.
The person responsible for arranging the
release of this announcement on behalf of Tate & Lyle is
Claire-Marie O'Grady, Company Secretary.
FOR FURTHER
INFORMATION PLEASE CONTACT:
For
Tate & Lyle PLC:
Investors and Analysts
Christopher Marsh, VP Investor
Relations
Tel: Mobile: +44 (0) 7796 192
688
Media
Nick Hasell, FTI
Consulting
Tel: Mobile: +44 (0) 7825 523
383
Tel: Office: +44 (0) 203 727 1340
tate@fticonsulting.com
Greenhill
& Co. International LLP
+44
207 198 7400
(Sponsor and Joint Lead
Financial Adviser to Tate & Lyle)
Seamus Moorhead
David Wyles
Charlie Stripp
Citigroup
Global Markets Limited
+44 207 986
0000
(Joint Lead Financial Adviser and Corporate
Broker to Tate & Lyle)
Andrew Seaton
Robert Way
Christopher Wren
Goldman Sachs
International
+44 207 774
1000
(Financial Adviser to Tate &
Lyle)
Anthony Gutman
Nick Harper
Christian Bauer
For
J.M. Huber:
Lea Volpe
Vice President, Communications &
Community Relations
Tel: Mobile: +1 404 956
4470
ADVISERS
For Tate &
Lyle:
In the context of the Proposed Transaction,
Greenhill & Co. International LLP ('Greenhill') is acting as
sponsor and joint lead financial adviser, Citigroup Global Markets
Limited ('Citigroup') is acting as joint lead financial adviser and
Corporate Broker, Goldman Sachs International is acting as
financial adviser and Linklaters LLP is acting as legal
adviser.
For
Huber:
In the context of the Proposed Transaction,
BofA Securities is acting as financial adviser and Kirkland &
Ellis International LLP is serving as legal counsel to Huber, with
White & Case LLP handling FDI and antitrust filings.
FURTHER
INFORMATION
PROPOSED COMBINATION OF TATE
& LYLE AND CP KELCO TO CREATE
A LEADING GLOBAL SPECIALITY FOOD AND BEVERAGE SOLUTIONS
BUSINESS
Introduction and
background to the Proposed Transaction
Over the last six years, Tate & Lyle has been
executing a major strategic transformation to become a
growth-focused speciality food and beverage solutions business,
aligned with attractive structural and growing consumer trends for
healthier, tastier and more sustainable food and drink. This has
included a much sharper focus on a number of key categories,
increased investment in innovation and solution-selling
capabilities, and the significant strengthening of its Sweetening,
Mouthfeel and Fortification platforms through new product
development and acquisitions.
A critical step in this journey was the sale, in
April 2022, of a controlling interest in Primient to KPS Capital
Partners, LP ('KPS'). On 23 May 2024, Tate & Lyle announced an
agreement to sell its remaining 49.7% interest in Primient to KPS,
thereby completing this strategic transformation.
Tate & Lyle and CP Kelco have collaborated on
innovation projects for many years, and see themselves as ideal
strategic partners with a shared purpose, values and culture.
Bi-lateral discussions with Huber over the last few months have
confirmed the strong strategic fit and the value creation
opportunity presented by the Proposed Transaction. Both
businesses are excited by, and see the significant benefits of, a
shared future.
Strategic
acceleration: Creating a leading speciality food and beverage
solutions business
The Board of Tate & Lyle believes the Proposed
Transaction will accelerate delivery of its growth strategy by
creating a leading, global speciality food and beverage solutions
business with an expanded offering, deeper technical capabilities
and an enhanced customer proposition.
The Board of Tate & Lyle believes that the
Proposed Transaction will:
· Create a leader in Mouthfeel, a critical driver of customer
solutions, and strengthen Tate & Lyle's expertise across its
three platforms of Sweetening, Mouthfeel and Fortification,
benefiting from:
-
Deep recipe application expertise and superior
solution flexibility.
-
Broader ingredient portfolio supporting
cost-in-use benefits.
-
The combination of Tate & Lyle's superior
sensory and CP Kelco's technical capabilities.
-
Expanded portfolio including seven of nine main
texturants used in food applications.
· Expand Tate & Lyle's offering in its large (US$19
billion7) and fast-growing (6% CAGR7)
speciality food and beverage ingredients addressable market, and
unlock further growth opportunities in its core and adjacent
markets:
-
Further extends opportunity to benefit from
growing global consumer demand for healthier, tastier and more
sustainable food and drink.
-
Complementary offering significantly strengthens
category expertise and opens new growth opportunities in core
categories and selected sub-categories.
-
Increases presence in large, fast-growing markets
of Asia, Middle East, Africa and Latin America.
-
Unlocks further growth opportunities such as
potentially extending core categories (for example into
confectionery), and geographic expansion across growth
markets.
-
Longer-term potential to expand in non-food
markets (eg. personal care, household goods).
· Accelerate R&D and innovation through highly complementary
scientific, technical and applications expertise, supporting the
development of the next generation of plant-based ingredients and
solutions:
-
Enhanced R&D and innovation
expertise.
-
Deep knowledge of plant-based ingredients and
value stream valorisation.
-
Integrated innovation pipelines.
-
Complementary open innovation and external
partnership opportunities.
· Drive a stronger financial performance:
-
Revenue growth towards the higher-end of 4%-6% per
annum ambition.
-
Significant adjusted EBITDA margin improvement
over the next few years.
-
Target consistently to exceed 75% free cash flow
conversion8.
· Be underpinned by a shared purpose, values and culture, and a
mutual belief in Tate & Lyle's commitment to science, solutions
and society, with both businesses committed to leading in
sustainability and delivering positive social impact.
About CP
Kelco
General
CP Kelco is a company within the
J.M. Huber Corporation portfolio of businesses. It is a
nature-based ingredient solutions company with approximately 90
years of experience working with food, beverage, consumer and
industrial products manufacturers worldwide. It produces an
extensive range of high-quality, plant-based and
fermentation-derived ingredients to provide tailored solutions for
its customers.
It is committed to providing
responsibly sourced and produced ingredients for its customers with
whom it collaborates closely through a global team of scientists
and applications experts. Key products include pectin,
carrageenan, gellan gum, xanthan gum, diutan gum,
fermentation-derived cellulose, refined locust bean gum,
microparticulated whey protein concentrate and citrus
fibre.
CP Kelco has a strong global talent
base of around 1,700 employees working out of seven manufacturing
facilities, two global innovation centres and nine regional
application centres. The business is headquartered in Atlanta,
Georgia, US. CP Kelco is committed to safety, quality and
sustainability, and to deliver a positive social impact.
Recent financial
performance
CP Kelco has an established track record of growth
having delivered mid-single digit EBITDA growth in the three years
ended 31 December 2021 (compound annual growth rate). It also
delivered EBITDA margin consistently above 20% in each of these
years.
Like many companies in our industry, in the two years
ended 31 December 2023 (see appendix), CP Kelco experienced
temporary EBITDA margin compression due to two main factors each of
which had broadly equal EBITDA margin impact. Firstly, the
adverse impact of macro-economic headwinds and industry-wide
challenges including inflationary pressures, customer de-stocking
and consumer softness. Secondly, supply chain disruption
during a major capital expenditure programme of more than US$400m
to increase capacity and productivity for speciality gums and to
drive innovation and sustainability for pectin. This programme was
initiated before the global pandemic and represented a major step
up from the historic (pre-2020) run-rate for capital expenditure of
around 8% of revenue. This one-time programme, in addition to a
temporary working capital build reflecting the inflationary cycle
and softer demand, also impacted free cash flow over this
period.
The deep access and engagement Tate & Lyle has
had over the last few months underpins the Board's confidence that
a phased recovery in CP Kelco's profitability can be delivered over
the next 3 to 4 years. The current financial year ending 31
December 2024 is already seeing a stabilisation in performance with
volume recovery in key product lines and regions, and actions are
underway on cost control and to reduce working capital.
Supply disruption from the capital investment programme is
gradually improving although not yet fully resolved.
Looking further ahead to 2025 and beyond, we expect
that a combination of an improvement in the macro-economic
environment and industry normalisation, the realisation of benefits
from major capital investments and an increase in margin accretive
solution selling will drive both topline acceleration and margin
recovery. Lower capital expenditure (6% to 7% of revenue), as well
as working capital recovery and optimisation, are also expected to
drive stronger free cash flow with cash conversion of more than
75%.
Gross assets and
other financial information
The gross assets of CP Kelco as at 31 December 2023
amounted to US$1,886 million. For the year ended 31 December 2023,
revenue was US$772 million, adjusted EBITDA was
US$131 million, and adjusted profit before
tax before exceptional items and recharges and other intra-group
costs from Huber was US$36 million. Reported profit before tax amounted to US$6
million (profit before tax is after charging depreciation and
amortisation of US$69 million and interest expense of US$27
million). This information is extracted from unaudited
management information prepared in accordance with US GAAP. The
financial information on CP Kelco for the three years ended 31
December 2023 prepared under IFRS and in accordance with Tate &
Lyle's accounting policies and including any relevant carve out
adjustments will be published in line with the UK Listing Rules
prior to completion of the Proposed Transaction. The Directors
expect that the adjustments to the US GAAP gross assets and profit
before tax will mainly arise in respect of the treatment of
research and development expenditure, operating leases and SaaS
(software as a service) contracts.
Key terms of the
Proposed Acquisition
Sale and purchase
agreement ('SPA')
Tate & Lyle and Huber have entered into an SPA
related to the Proposed Transaction and the key terms are
summarised below:
Financial
Under the SPA, Tate & Lyle will acquire the
entire issued share capital of CP Kelco for total implied headline
consideration of US$1.8 billion (subject to customary adjustments,
including CP Kelco's cash, debt and debt-like items and working
capital at completion).
· Of such total consideration, US$1.15 billion will be payable
in cash, and the remaining consideration being payable through the
issuance of 75 million new Tate & Lyle ordinary shares at
completion of the Proposed Transaction. Following completion, Huber
will become a long-term shareholder (c.16%) of Tate &
Lyle.
· Further, Tate & Lyle will be required to issue up to 10
million additional Tate & Lyle ordinary shares as further
consideration (calculated on a sliding scale) to be delivered to
Huber two years post-completion of the Proposed Transaction,
subject to performance criteria based on the increase in Tate &
Lyle's share price.11
· The cash consideration payable by Tate & Lyle as part of
the Proposed Transaction will be funded through a combination of
new and existing debt financing facilities and existing cash
resources. Certain key details relating to the new debt financing
are set out below.
Timing and
conditions
The Proposed Transaction constitutes
a Class 1 transaction for Tate & Lyle under the UK Listing
Rules and is, therefore, as at the date of this announcement,
conditional on the approval of Tate & Lyle's shareholders (the
'Shareholder Approval Condition'). As indicated by the FCA, the UK
Listing Rules are expected to change in the coming weeks, such that
the requirement for a shareholder vote for a Class 1 transaction
would no longer apply. Huber and Tate & Lyle have agreed that
should the amended UK Listing Rules come in force on or before 31
August 2024 (or such other later date as agreed between the
parties), and such amended UK Listing Rules remove the requirement
for a shareholder vote for Class 1 transactions, then the
Shareholder Approval Condition will no longer apply.
The Proposed Transaction is also
conditional on receipt of certain customary regulatory
approvals.
Other terms of the
SPA
If the Board of Tate & Lyle
fails to include or changes a unanimous recommendation in the
circular to the Tate & Lyle shareholders to vote in favour of
the Proposed Transaction (assuming the new UK Listing Rules do not
come into force and remove the requirement for a Shareholder
Approval Condition), and the shareholders do not approve the
Proposed Transaction at the General Meeting, Tate & Lyle and
Huber are, in their sole discretion, entitled to terminate the SPA.
If such termination right is exercised, Tate & Lyle will be
required to reimburse Huber for any documented costs and expenses
in connection with the Proposed Transaction up to a maximum of
c.£27.2 million.
If the SPA is terminated due to the
Proposed Transaction not being approved by the shareholders of Tate
& Lyle by the long stop date12, which arises
directly as a result of Huber not providing certain key information
which it is required in connection with the preparation of the
circular for Tate & Lyle's shareholders under the UK Listing
Rules, Huber will be required to reimburse Tate & Lyle for any
documented costs and expenses incurred by Tate & Lyle in
connection with the Proposed Transaction up to a maximum of c.£27.2
million.
Huber will give a customary set of
warranties to Tate & Lyle in relation to CP Kelco. Tate &
Lyle will obtain a warranty and indemnity insurance policy to cover
any losses that may arise from breach of the warranties to be
provided by Huber. The SPA also contains warranties given by Tate
& Lyle that are customary for a transaction of this
nature.
In connection with the Proposed
Transaction, Huber has also agreed to provide Tate & Lyle
certain business-related indemnities. Each of Huber and Tate
& Lyle have also agreed to undertake certain actions between
the date of the SPA and completion of the Proposed
Transaction.
CP Kelco and Tate & Lyle are
subject to certain customary restrictions in the period between the
date of the SPA and completion.
Huber is subject to customary
non-solicitation and non-compete provisions which apply for a
period of two years following completion.
Financing the
Proposed Transaction
In connection with the Proposed Transaction, Tate
& Lyle has entered into a new committed US$600 million
bridge-financing facility, provided by Citibank N.A., London
Branch. The bridge-financing facility is available for an initial
term of 12 months from the date of the bridge facility agreement,
with up to two six-month extensions available at the discretion of
Tate & Lyle. The initial bridge financing facility is intended
to cover the financing of part of the cash portion of the
acquisition consideration. In due course, Tate & Lyle
intends to refinance the initial bridge-financing facility through
a combination of any one or more of new medium-term and long-term
debt instruments.
Management and
employees
CP Kelco has its own management team
led by Didier Viala, President. Given the importance of the
management team in representing CP Kelco's operations and prospects
it is intended that, following integration, the CP Kelco management
team will be represented in both the Executive and broader Tate
& Lyle leadership teams.
Under the terms of the SPA, Tate
& Lyle has agreed that, for a period of 12 months following
completion, it will provide employees of CP Kelco with base salary,
hourly wage rate and certain employee benefits that are no less
favourable in the aggregate than those provided before
completion.
Relationship
Agreement
Huber will become a long-term
shareholder (c.16%)6 in Tate & Lyle following
completion. This long-term equity stake was key to creating the
opportunity to unlock the combination and reflects Huber's strong
conviction in the future value creation of the combined
business.
At completion of the Proposed Transaction, Tate &
Lyle will enter into a relationship agreement with Huber to
regulate the relationship between Tate & Lyle and Huber (in its
capacity as a shareholder of Tate & Lyle) (the 'Relationship
Agreement').
Pursuant to the Relationship
Agreement, Huber will be entitled to nominate two non-executive
directors of Tate & Lyle for as long as it holds at least 15%
of Tate & Lyle's ordinary shares and one non-executive director
of Tate & Lyle for as long as it holds at least 10% of Tate
& Lyle's ordinary shares, subject in each case to adjustment
for the dilutive impact of certain equity issuances by Tate &
Lyle. At completion of the Proposed Transaction, the non-executive
directors nominated by Huber will enter into appointment letters in
respect of their appointments to the Board on substantially the
same terms, where applicable, as Tate & Lyle's existing
non-executive directors.
Subject to certain limited exceptions, Huber will be
restricted from dealing in Tate & Lyle's shares for a two-year
period following completion of the Proposed Transaction. Following
the expiry of this two-year period, Huber will be permitted to
dispose of its Tate & Lyle shares in line with customary
orderly market provisions.
Other aspects of the
Proposed Transaction
Tate & Lyle and Huber have agreed a transitional
services agreement, which will govern the provision of certain
services between CP Kelco and Huber for a limited period following
completion.
Board's views on the
Proposed Transaction
The Board of Tate & Lyle believes that the
Proposed Transaction is in the best interests of Tate & Lyle's
shareholders. Accordingly, if approval from Tate & Lyle's
shareholders is required prior to completion of the Proposed
Transaction in accordance with the then prevailing terms of the UK
Listing Rules, the Directors intend unanimously to recommend that
shareholders vote in favour of the resolution at a General Meeting
to be convened to consider the Proposed Transaction.
Additional
resolution for Annual General Meeting 2024
In connection with the combination of the Tate &
Lyle and CP Kelco businesses, the Board considers that it might be
appropriate to change the name of the combined entity from Tate
& Lyle to a new name. At the present time, any such
change of name would require the approval of shareholders at a
General Meeting. In contemplation of the changes to the Listing
Rules as set out above, the Board proposes to amend the Company's
Articles of Association to permit the directors to change the
name. Accordingly, the Directors will reissue the proxy card
for the Annual General Meeting on 25 July 2024 with an additional
resolution seeking shareholder approval for this proposed amendment
to the Articles.
Information on Tate
& Lyle
Supported by our 160-year history of ingredient
innovation, we partner with customers to provide consumers with
healthier and tastier choices when they eat and drink. We are proud
that millions of people around the world consume products
containing our ingredients every day. Through our expertise
in sweetening, fortification, and texture, we develop ingredient
solutions which reduce sugar, calories, and fat, add fibre and
protein, and provide texture and stability in categories including
beverages, dairy, bakery, snacks, soups, sauces, and dressings.
We have more than 3,300 employees working in around
58 locations serving customers across
121 countries. Science, Solutions, Society is our brand promise and
how we will achieve our purpose of Transforming Lives Through
the Science of Food. By living our purpose we believe we can
successfully grow our business and have a positive impact on
society. We live our purpose in three ways, by supporting healthy
living, building thriving communities and caring for our
planet.
Tate & Lyle is listed on the London Stock
Exchange under the symbol TATE.L. American Depositary Receipts
trade under TATYY. In the year to 31 March 2024, Tate & Lyle
revenue from continuing operations totalled £1.65
billion.
Tate & Lyle PLC's LEI number is:
2138008K14474WPKZ244.
Information on CP
Kelco
CP Kelco is a nature-based
ingredient solutions company with approximately 90 years of
experience working with food, beverage, consumer and industrial
products manufacturers worldwide. What sets it apart
are:
· Unlocking Nature-Powered
Success®. Applying ingredient
innovation and problem-solving to develop customised solutions that
leverage its regional insights and meet manufacturers' goals to
address consumer needs and preferences.
· Unique
Producing an extensive range of high-quality,
plant-based and fermentation-derived ingredients to formulate
tailored solutions.
· Technical
Excellence. Offering strong
collaboration with a global team of scientists and applications
experts, leveraging its regional state-of-the art R&D
facilities.
· Commitment to provide responsibly sourced and produced
ingredients.
· Market:
Understanding market and consumer trends to help
customers create relevant and innovative products.
Its key product lines include gellan
gum, pectin, carrageenan, xanthan gum, diutan gum,
fermentation-derived cellulose, refined locust bean gum,
microparticulated whey protein concentrate and our latest
innovation, NUTRAVA® Citrus Fiber. Learn more at
www.cpkelco.com.
Information on
Huber
Huber, one of the largest
family-owned companies in the US, produces a variety of consumer
and industrial products. With nearly 5,000 employees in
approximately 20 countries and US$3 billion in annual revenue,
Huber has remained family-owned since its founding by Joseph Maria
Huber in 1883. Headquartered in Atlanta, Georgia, Huber
operates as a Portfolio Management Company, giving each Huber
company the autonomy to manage their business to serve their
customers. Huber's four business, CP Kelco, Huber Engineered
Materials, Huber Engineered Woods and Huber Resources Corp., hold
leadership positions in rapidly growing markets such as
hydrocolloids, personal care, food and
beverage, agricultural nutrients and adjuvants, building materials,
flame retardants and smoke suppressants, as well as sustainable
forestry services.
----------------------------------------------------------------------------
11. Deferred share
consideration contingent on Tate & Lyle's volume-weighted
average price for the 30 trading days ending on and including the
date that is two years following completion of the Proposed
Transaction, with the full 10 million shares to be issued if Tate
& Lyle's share price over such period is at least £10.00, and
no deferred share consideration will be payable if Tate &
Lyle's share price over such period is £8.50 or below. Tate
& Lyle also has the option to pay part of the deferred
consideration in cash.
12. Long stop date for the SPA
is 6 months following the date of the SPA (or, if any of the
regulatory approvals have not been received by such date, 9 months
following date of the SPA).
Important
Notices
Greenhill & Co. International
LLP ('Greenhill'), an affiliate of Mizuho Financial Group, Inc.,
which is authorised and regulated in the UK by the
Financial Conduct Authority, is acting as financial adviser and
sponsor for Tate & Lyle and for no one else in connection with
the Proposed Transaction and other matters described in this
announcement, and will not be responsible to anyone other than Tate
& Lyle for providing the protections afforded to clients of
Greenhill nor for providing advice in connection with the Proposed
Transaction or any other matters referred to in this announcement.
Neither Greenhill nor any of its affiliates, directors or employees
owes or accepts any duty, liability or responsibility whatsoever
(whether direct or indirect, consequential, whether in contract, in
tort, in delict, under statute or otherwise) to any person who is
not a client of Greenhill in connection with this announcement, any
statement contained herein, the Proposed Transaction or
otherwise.
Citigroup Global Markets Limited
('Citigroup'), which is authorised by the Prudential Regulation
Authority and regulated in the UK by the Financial
Conduct Authority and the Prudential Regulation Authority, is
acting as financial adviser for Tate & Lyle and for no one else
in connection with the Proposed Transaction and other matters
described in this announcement, and will not be responsible to
anyone other than Tate & Lyle for providing the protections
afforded to clients of Citigroup nor for providing advice in
connection with the Proposed Transaction or any other matters
referred to in this announcement. Neither Citigroup nor any of its
affiliates, directors or employees owes or accepts any duty,
liability or responsibility whatsoever (whether direct or indirect,
consequential, whether in contract, in tort, in delict, under
statute or otherwise) to any person who is not a client of
Citigroup in connection with this announcement, any statement
contained herein, the Proposed Transaction or otherwise.
Goldman Sachs International
('Goldman Sachs'), which is authorised and regulated in
the UK by the Financial Conduct Authority, is acting as
financial adviser for Tate & Lyle and for no one else in
connection with the Proposed Transaction and other matters
described in this announcement, and will not be responsible to
anyone other than Tate & Lyle for providing the protections
afforded to clients of Goldman Sachs nor for providing advice in
connection with the Proposed Transaction or any other matters
referred to in this announcement. Neither Goldman Sachs nor any of
its affiliates, nor their respective partners, directors, officers,
agents or employees owes or accepts any duty, liability or
responsibility whatsoever (whether direct or indirect,
consequential, whether in contract, in tort, in delict, under
statute or otherwise) to any person who is not a client of Goldman
Sachs in connection with this announcement, any statement contained
herein, the Proposed Transaction or otherwise.
Linklaters LLP is acting as legal
adviser to Tate & Lyle on the Proposed Transaction.
This announcement is not intended
to, and does not constitute or form part of, and should not be
construed as, any offer, invitation, solicitation or recommendation
of an offer to purchase, sell, subscribe for or otherwise dispose
of or acquire any securities or the solicitation of any vote or
approval in any jurisdiction and neither the issue of the
information nor anything contained herein shall form the basis of
or be relied upon in connection with, or act as an inducement to
enter into, any investment activity. No shares are being offered to
the public by means of this announcement. This announcement does
not constitute either advice or a recommendation regarding any
securities, or purport to contain all of the information that may
be required to evaluate any investment in Tate & Lyle or any of
its securities and should not be relied upon to form the basis of,
or be relied on in connection with, any contract or commitment or
investment decision whatsoever. Past performance is not an
indication of future results and past performance should not be
taken as a representation that trends or activities underlying
past performance will continue in the
future.
The distribution of this announcement in
jurisdictions in or from certain jurisdictions may be restricted or
prohibited by the laws of any jurisdiction other than
the United Kingdom. Recipients are required to inform
themselves of, and comply with, all restrictions or prohibitions in
such other jurisdictions. Any failure to comply with applicable
requirements may constitute a violation of the laws and/or
regulations of other such jurisdiction.
This announcement has been prepared for the
purposes of complying with the applicable law and regulation of
the United Kingdom (including the Listing Rules and the
Disclosure Guidance and Transparency Rules) and the information
disclosed may not be the same as that which would have been
disclosed if this announcement had been prepared in accordance with
the laws and regulations of any jurisdiction outside of
the United Kingdom.
This announcement is being distributed to all
owners of Ordinary shares and American Depository Receipts. A copy
of this announcement can be found on our website at
www.tateandlyle.com. A hard copy of this statement is also
available from the Company Secretary, Tate & Lyle PLC, 5 Marble
Arch, London WC2B 6AT.
Cautionary Note
regarding Forward-Looking Information
This announcement may contain
certain forward-looking statements, beliefs or opinions, including
statements with respect to Tate & Lyle's business, financial
condition and results of operations. These forward-looking
statements can be identified by the use of words such as
"anticipate", "expect", "estimate", "intend", "will", "may",
"project", "plan", "target" and "believe" and other words of
similar meaning in connection with any discussion of future events.
These statements, by their nature, involve risk, uncertainty and
qualifications because they relate to events and depend upon
circumstances that may or may not occur in the future. A number of
factors could cause actual results and developments to differ
materially from those expressed or implied by the forward-looking
statements in this announcement and accordingly all such statements
should be treated with caution. There can be no assurance that any
particular forward-looking information will be realised, and the
performance of Tate & Lyle may be materially and adversely
different from the forward-looking statements. Except where
otherwise stated, this announcement speaks as of the date hereof.
Other than in accordance with its legal or
regulatory obligations (including
under the Listing Rules, the Disclosure Guidance and Transparency
Rules and the Prospectus Regulation Rules), Tate & Lyle is not
under any obligation and Tate & Lyle expressly disclaims any
intention or obligation (to the maximum extent permitted by law) to
update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise.
No statement in this announcement
(including any statement of estimated synergies) is intended as a
profit forecast or estimate for any period and no statement in this
announcement should be interpreted to mean that earnings or
earnings per share or income, cash flow from operations or free
cash flow for Tate & Lyle for the current or future financial
years would necessarily match or exceed the historical published
earnings or earnings per share or income, cash flow from operations
or free cash flow for Tate & Lyle.
Certain figures contained in this
announcement, including financial information, have been subject to
rounding adjustments. Accordingly, in certain instances, the sum or
percentage change of the numbers contained in this announcement may
not conform exactly to the total figure given.
Except as explicitly stated, neither
the content of Tate & Lyle's website (or any other website) nor
any website accessible by hyperlinks on Tate & Lyle's website
(or any other website) is incorporated in, or forms part of, this
announcement.
APPENDIX
FINANCIAL INFORMATION
Historical Financial
Information on CP Kelco
|
|
|
|
CP
Kelco1, $m unless otherwise stated
|
Year ended
31 December 2021
|
Year ended
31 December 2022
|
Year ended
31 December 2023
|
Volume change (%)
|
8%
|
(2)%
|
(13)%
|
Revenue
|
749
|
796
|
772
|
- Change %
|
9%
|
6%
|
(3)%
|
Adjusted
EBITDA2
|
170
|
151
|
131
|
Adjusted EBITDA margin2
|
22.6%
|
19.0%
|
17.0%
|
Depreciation and amortisation
|
68
|
67
|
69
|
Adjusted operating
profit2
|
102
|
84
|
62
|
Capital expenditure
|
(129)
|
(141)
|
(85)
|
Change in working capital
|
(5)
|
(76)
|
(38)
|
Exceptional restructuring cash
flow
|
-
|
-
|
(14)
|
Free cash flow before
tax3
|
47
|
(66)
|
(6)
|
Tax cash4
|
(26)
|
(20)
|
(15)
|
Free cash flow including
tax
|
21
|
(86)
|
(21)
|
Notes
1. This
information is extracted from unaudited CP Kelco management
information prepared in accordance with US GAAP and has not been
aligned to Tate & Lyle's accounting policies.
2. CP Kelco's
reported EBITDA and operating profit have been adjusted to be both
consistent with Tate & Lyle adjusted results definition (for
descriptions of the various metrics and their reconciliation to the
most directly comparable reported measures see Tate & Lyle 2024
Annual Report on pages 146 to 148). Additionally, EBITDA and
operating profit have been adjusted for Huber service costs that
will not be incurred under Tate & Lyle ownership.
3. Free cash flow
is shown as reported; only selected material cash flows are
shown.
4. CP Kelco is
part of the Huber tax group; tax cash assumes a 24% effective tax
rate paid in the year incurred.
Illustrative
pro-forma financial information for the proposed combination of
Tate & Lyle and CP Kelco
To assist with understanding the impact of the
Proposed Transaction, set out below is illustrative pro-forma
financial information for the combination of Tate & Lyle and CP
Kelco for their most recent completed accounting years.
Tate & Lyle prepares financial information under
IFRS and for accounting periods ending on 31 March, CP Kelco
prepares financial information under US GAAP for accounting periods
ending 31 December. The illustrative pro-forma financial
information is neither aligned for accounting periods, GAAP
differences, accounting policies nor reflects the necessary
standalone carve out adjustments.
|
|
|
|
|
£m
unless otherwise stated
|
Tate &
Lyle
Year ended
31 March 2024
|
CP
Kelco2,3
Year ended
31 December 2023
|
Benefit of cost
synergies4
|
Illustrative pro-forma,
adjusted for benefit of cost synergies
|
Revenue
|
1
647
|
621
|
-
|
2,268
|
Adjusted operating
profit1
|
258
|
50
|
40
|
348
|
Depreciation and
amortisation1
|
70
|
56
|
-
|
126
|
Adjusted
EBITDA1,4
|
328
|
106
|
40
|
474
|
Adjusted EBITDA margin1
|
19.9%
|
17.0%
|
|
20.9%
|
The above information is not
intended to constitute pro-forma financial information for the
purposes of the UK Listing Rules or PR Regulation
(the UK version of Regulation
number 2019/980 of the European Commission). If Tate & Lyle is required to publish a Class 1
circular in connection with the Proposed Transaction in accordance
with the prevailing UK Listing Rules and PR Regulation prior to
completion, the pro forma information in such circular would differ
from the illustrative pro forma information set out in the table
above.
Notes
1. Adjusted
results and a number of other terms and performance measures used
in this document are not directly defined within IFRS. We have
provided descriptions of the various metrics and their
reconciliation to the most directly comparable measures reported in
accordance with IFRS and the calculation (where relevant) of any
ratios in the 2024 Annual Report on pages 146 to 148.
2. CP Kelco
financial information is presented in US Dollars, such information
has been translated into GB Pounds at the average rate for the year
to 31 December 2023 of USD:GBP 1.243:1.
3. CP Kelco's
reported EBITDA for the year ended 31 December 2023 was £82
million. This has been adjusted to be both consistent with
Tate & Lyle adjusted results definition and to adjust for Huber
service costs that will not be incurred under Tate & Lyle
ownership. Accordingly, the following adjustments have been
made; 1) exceptional costs of £11 million were removed (as they are
material in amount; and are outside the normal course of business
or relate to events which do not frequently recur); and, 2)
recharges and other intra-group costs from Huber of £13 million
were removed.
4. Cost synergies
of US$50 million (£40 million) are expected to be delivered in the
first two full years from completion of the Proposed
Transaction. For the purposes of this illustrative
information the full synergies are considered to be in place for
the year presented.
ENDS