Tate & Lyle PLC (LSE:TATE) can be “an attractive opportunity for another industry player”, according to analysts at Deutsche Bank who have lifted their target price on the news of a potential takeover.
On Thursday, after market close, it was announced that Ingredion had tabled a 615p-per-share approach that, DB says, has validated a long-held view that the ingredients group was undervalued.
The bank repeated a ‘buy’ rating and increased its target price to 595p from 460p (current price 538p).
Analyst Damian McNeela, in a note, said Deutsche Bank had “long argued that Tate has been mis-priced” and, therefore, is not surprised by Ingredion's offer.
Tate revealed that Ingredion had made previous approaches, and the two companies are now in negotiations, with the potential bidder given until 11 June to make a firm offer under City rules.
DB noted as well that Tate’s standalone investment case had been held back by weak momentum, with organic growth “lacklustre” and the market backdrop still challenging, which left “very limited scope for a re-rating” otherwise. McNeela said, making the offer price look reasonable in the context of Tate’s current trading and peer valuation gap.
The proposed 615p bid values Tate at 15.1 times price-to-earnings and 8.4 times EV/EBITDA on Deutsche Bank’s CY26 estimates, which the broker said is much closer to the group’s peer set than where the shares currently trade.
“We think this would be a fair price for a good asset with a strategic fit for Ingredion,” McNeela added.