Tate & Lyle: Acquisition of CP Kelco Makes Strategic Sense; Shares Cheap

We confirm our GBX 900 fair value estimate for narrow-moat Tate & Lyle after it announced an agreement to acquire US-based specialty chemical producer CP Kelco from J.M. Huber for a total consideration of USD 1.8 billion on a debt-free, cash-free basis. CP Kelco’s portfolio consists primarily of natural-based ingredients, such as pectin and specialty gums used to improve the “mouthfeel” of food products. This represents a key platform for Tate & Lyle that is now being strengthened by CP Kelco’s leading portfolio and is aligned with consumer demand for clean-label, plant-based, fiber-rich food products.