lencops
gone but not forgotten
- With thanks to The Guardian newspaper.Julia Finch and Richard Wray
- guardian.co.uk, Thursday 1 July 2010 13.38 BST
- Article history
The new owners immediately pledged there would be no job losses at either of the Tate & Lyle refineries in Silvertown, in the East End of London, which have been operating for more than 130 years. A spokesman for the New York-based company said: "We will be keeping them open. There will be no job losses as a result of this transaction. This is not like Kraft and Cadbury. We need these operations, and Tate & Lyle's refinery in Lisbon."
Valued at more than £2bn on the stock exchange, Tate & Lyle is Europe's leading cane sugar producer, but now makes two-thirds of its profits from sweeteners, starches and ethanol production; it is the company behind Splenda sweetener.
City analysts had forecast in the spring that the new Tate boss, Javed Ahmed, was likely to cut ties with the 150-year-old sugar business. The cash raised from the deal – which gives ASR use of the Tate & Lyle brand in connection with sugars in perpetuity – with be used to reduce Tate's £814m debt pile.
Ahmed, who was lured from top-performing stock market favourite Reckitt Benckiser last year, wants to concentrate resources on growing Tate & Lyle's food ingredients operations. Unveiling the deal this morning, he said: "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."
Some analysts, however, questioned Ahmed's strategy and the low price he has achieved for the sugar business. Howard Wheeldon at BGC Partners, said: "Reducing debt is one thing – selling a company birthright for a pittance to become what management apparently term as something more focused and less volatile is quite another."
He added: "Refining sugar might be a pretty humdrum and boring business using plants that often look as if they were built at the time of the ark, but it has served Tate & Lyle shareholders very well over past 100 or so years. Better still it has and continues to generate oodles of cash."
However, analyst Dirk van Vlaanderen of Jefferies said selling the sugar business was the right strategy: "We see the move as positive as it offers a cash injection and a move away from commoditised businesses."
Three years ago ASR snapped up Tate & Lyle Canada for £130m, having already acquired Tate's subsidiary North American Sugars in 2001.
Ahmed said the deal would result in a "more focused, less volatile business", enabling it to deliver sustainable long-term growth in food ingredients, supported by cash from its bulk ingredients operations. "This disposal will enable us to concentrate our resources on delivering our strategic objectives as we focus, fix and grow our business," he added.
As well as the golden syrup factory and the London refineries, the deal includes Tate & Lyle's cane sugar refineries in Lisbon together with associated sugar and syrup brands. The businesses had sales of £689m in the year to end March and operating profit of £14m. The sale is expected to throw up a book loss of about £55m before disposal costs, but will be earnings neutral in 2011.
Tate said it also planned to sell the remaining businesses within the division, principally its molasses and Vietnamese sugar operations.
Luis Fernandez, co-president of ASR, said the Tate & Lyle heritage was safe in his company's hands: "Tate & Lyle is steeped in 130 years of tradition and consumer loyalty," he said. "We recognise the importance and history of the Tate & Lyle sugar brand and are proud to add it to our existing brand portfolio."
ASR, based in Yonkers, New York, owns and operates six cane sugar refineries across North America. Its brands include Domino, Florida Crystals and Redpath.
Birth of a brand
Tate & Lyle traces its roots back to 1859, when Lancashire-born grocer Henry Tate, the son of a Unitarian minister, went into partnership with John Wright, a sugar refiner in Liverpool. When that partnership came to an end, Tate was joined in business by his two sons to create Henry Tate & Sons. The company went on to introduce the sugar cube to the UK in 1875.At around the same time Henry Tate also funded the building of the Tate Gallery in London and donated his own art collection.
Abram Lyle, a Scottish shipowner, was also a Victorian entrepreneur. Having transported sugar for years, he expanded into sugar refining in 1875 and by 1885 was turning out Lyle's Golden Syrup – a waste product from sugar refining.
The two companies merged in 1921 and at that time they refined half the country's sugar. The merged business was one of the original constituents of the FTSE 30 index established in 1935, only two of which still exist. The cartoon character Mr Cube was created in 1949 as part of a fierce campaign to prevent the post-war Labour government of Clement Attlee nationalising the business, and went on to be an advertising icon long after the threat had disappeared.
In 1965 a period of diversification began, into starch production in the US, sugar refining abroad, citric acid (used for many applications, from flavour enhancers in food to metal polish and cough mixture) and salmon feed for farmed fish. In 1976, working with researchers from the then Queen Elizabeth College at the University of London, Tate & Lyle discovered the calorie-free sweetener sucralose, later renamed Splenda. The company became the sole manufacturer and seller.
By the 1980s it had moved into the soft drinks market in the US, buying AE Staley, which manufactures high-fructose corn syrup – a common ingredient in processed foods and drinks. However, in recent years the company has run into problems in the sugar business: falling demand, intense competition, supply problems and rising energy costs mean Tate's refining business barely makes a profit.
Elsewhere, the company's Fort Dodge corn plant, in Iowa, has been mothballed, resulting in a £217m write-off charge last year. Tate has also mothballed a factory in Alabama and shifted all its production of Splenda to Singapore.
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