Sweet deal for tate & lyle?

Tate & Lyle’s shares fell by 9% after it confirmed that it will focus on healthy food products by buying ingredients-supplier CP Kelco for $1.8bn, say Helen Cahill and Isabella Fish in The Times.

Tate & Lyle says the deal will help it meet a target of annual revenue growth of between 4% and 6% by capitalising on mounting demand for healthier foods. It also hopes that buying CP Kelco will expand the group’s range of products that can help “sweeten foods, provide the right texture and improve fibre content”.

The deal comes amid intensifying scrutiny of ultra-processed foods such as flavoured yoghurts and sweet snacks, with research increasingly linking them to diseases including cancer and Type 2 diabetes, says Eri Sugiura in the Financial Times.

Tate and Lyle says the problem lies with “the lack of nutritional content rather than the processing itself”, and that CP Kelco’s technologies “would help them develop new products addressing this”. The deal will also help grow Tate & Lyle’s footprint in fast-growing emerging markets.

Healthy yet tasty

Tate & Lyle hopes the deal will ensure the combined entity can supply “producers looking to make food which is healthier but still tasty enough to fly off the shelves”, says AJ Bell’s Russ Mould. But the scale of the deal is “clearly making some investors nervous” – large deals “have a nasty habit of destroying rather than creating shareholder value”.

The fact that the deal is being funded through a mixture of debt and cash means it will lead to extra strain on Tate & Lyle’s balance sheet. Much depends on its ability to deliver savings by combining operations, as well as the promised im