Britain’s Tate & Lyle, which has several facilities in Illinois, is selling its European sugar operations to American Sugar Refining for 211 million pounds, breaking a 150-year link to sugar in favour of low-calorie sweeteners offering faster growth. The privately-owned U.S. group is buying Tate’s sugar and Golden Syrup business with a perpetual licence to use the Tate & Lyle name, while Tate said on Thursday it will focus on its sweeteners such as Splenda and its industrial starches.
The British sugar maker’s roots go back to 1859 when Henry Tate started refining, then introduced the sugar cube to Britain in 1875, and his legacy lives on after he bequeathed his paintings to form the nucleus of London’s Tate Britain gallery.
Tate’s new Chief Executive Javed Ahmed sparked talk of a sale of its underperforming sugar operations in May when he promised to focus on its super sweetener Splenda and corn-based sweeteners and starches largely made in the United States..
Tate shares were up 2.7 percent to 462.1 pence at 1029 GMT in a lower London market as analysts welcomed its exit from a low profits business and after it gained a higher than expected price for a commodity business subject to big world sugar price swings.
“We see the move as positive as it offers a cash injection and a move away from commoditised businesses,” said analyst Dirk Van Vlaanderen at Jefferies International, while Graham Jones at Panmure Gordon said it was a very welcome move at a good price.
Henry Tate opened his Silvertown refinery on the River Thames in East London during 1878 and join with Scottish-born Abram Lyle in 1921 to form Tate & Lyle after Lyle started producing his Golden Syrup in 1885 close to Tate’s refinery.
Lyle refined his product from a treacly syrup that usually went to waste from sugar cane refining and now more than one million tins of the Golden Syrup leave the Plaistow plant each month in distinctive green and gold Victorian-style tins.
However by 1988, Tate & Lyle started investing in the American and European sweetener and starch industry using corn or wheat based products for the soft drinks, food and packaging industries, and the influence of the commodity sugar business within the group started to decline.
Tate which had became a founder member of the FT-30 index in 1935 and a mainstay of the British food industry added that it was looking to sell its remaining sugar business in Vietnam and its molasses unit in Britain by the end of 2010 in a move that would completely cut its links with the sugar industry.
Analyst Van Vlaanderen at brokers Jefferies said this further sale could fetch a further 100-150 million pounds.
Tate has struggled as Europe’s only significant cane sugar refiner in a beet sugar dominated continent and Investec Securities analyst Martin Deboo said he had been happy to even support the closure of a business which made a loss last year if European Union aid is stripped out.
The Tate businesses being sold include its London-based Silvertown refinery employing around 550 and its syrup plant with around 40 jobs, and also its Portuguese Lisbon refinery employing around 200.
Tate said the proceeds will be used to pay down its 814 million pounds debt and the disposal is expected to complete in about two months, and will result in a book loss of about 55 million pounds. It is expected to be neutral to the group’s earnings per share in its current financial year to March 2011.
“Sugar refining has enjoyed a long and proud history within Tate & Lyle, but we believe the interests of this business and its employees are now best served by being part of a company for whom sugar refining is core,” Tate’s Ahmed said in a statement.
The buyer, American Sugar Refining, operates six cane sugar refineries in North America, and had bought some of Tate’s former sugar businesses such as Domino in the U.S. and Redpath in Canada in recent years.
