Shares in Tate & Lyle (TATE) ticked up 2.6% to 738p after the food and drink ingredients firm announced the acquisition of prebiotic dietary fibre business Quantum from China-listed ChemPartner.
Tate & Lyle said the $237 million acquisition will strengthen its position as a leading player in the rapidly growing global dietary fibres market.
The deal will also expand its presence in China and Asia and be ‘accretive’ to sales growth and EBITDA margin in the first year of ownership.
TATE’S QUANTUM LEAP
Based in China’s Guangdong Province, Quantum produces and sells fructo-oligosaccharides and galacto-oligosaccharides which combined represent around 25% of a global dietary fibres market forecast to grow at around 6% a year.
In China, which currently speaks for the bulk of Quantum’s sales, the FOS and GOS market is forecast to grow at around 10% a year.
For the 11 months to November 2021, Quantum generated $15 million of EBITDA on $50 million turnover.
HAMPTON’S TAKE
Tate & Lyle CEO Nick Hampton insists Quantum is a business recognised for its high quality ingredients and solutions. He says: ‘This acquisition significantly strengthens our fortification capabilities and expands our customer offering in key food and drink categories.
‘FOS and GOS are highly complementary to our existing fibre portfolio and will enable us to offer a broader range of solutions to our customers.
‘The acquisition is also very much in line with our purpose to support healthy living by improving gut health, and driving sugar and calorie reduction and fibre fortification for consumers across the world.’
Shares in Tate & Lyle are trading 13.4% above the 650.6p at which we highlighted their attractions in December 2021.
In February, the food producer reported positive momentum for the its continuing Food & Beverage Solutions business ahead of a separation into two businesses set to compete by the end of March 2022.
The company also upgraded full year pre-tax profit growth guidance for the ‘new’ Tate & Lyle from high single digits to low double digits.
