Tate & Lyle PLC (LSE:TATE), the food and beverage group, confirmed on Thursday it had agreed to acquire ingredients company CP Kelco for US$1.8 billion (£1.4 billion) from JM Huber.
The acquisition will include purchasing CP Kelco U.S., CP Kelco China, and CP Kelco ApS, all on a cash-free, debt-free basis.
This strategic move is expected to drive stronger revenue growth towards the higher end of 4% to 6%, and significant underlying profit [EBITDA] margin improvement over the next few years.
Nick Hampton, chief executive at 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."
Tate & Lyle said the deal would be funded through a mix of new and existing debt facilities, cash resources plus some equity.
Part of the offer includes issuing 75 million new Tate & Lyle ordinary shares to chemicals group JM Huber, making the seller a 16% shareholder in Tate & Lyle.
Huber will also appoint two non-executive directors to the Tate & Lyle Board.
Cost synergies from the deal are expected to be felt in the second full financial year post-completion and are targeted to save at least £40 million per annum.
Didier Viala, President of CP Kelco, said: "We are delighted to be joining with Tate & Lyle to create a leading and differentiated speciality food and beverage solutions business."
The acquisition is expected to be completed in the fourth quarter of 2024, pending regulatory and shareholder approval.