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Food producer Tate & Lyle PLC announced on Thursday its plan to acquire U.S.-based nature-based ingredients maker CP Kelco from JM Huber Corp. in a cash and share deal valued at $1.8 billion. The acquisition aims to leverage the growing demand for plant-based and clean ingredients.

Tate & Lyle $1.8B CP Kelco Deal :Details of the Acquisition

Tate & Lyle has entered into an agreement to purchase CP Kelco's operations in the U.S., China, and Denmark. CP Kelco is known for producing pectin, specialty gums, and products derived from lily pads and seaweed.

The British company will pay $1.15 billion in cash and issue 75 million new shares to Huber, valued at approximately $645 million. This transaction will give Huber a 16% stake in Tate & Lyle, entitling it to appoint two nonexecutive directors to Tate & Lyle's board.

Tate & Lyle $1.8B CP Kelco Deal : Legal and Financial Advisors

Linklaters LLP is serving as legal adviser to Tate & Lyle. The team is led by Simon Branigan, global head of corporate, along with corporate partners Lisa Chang and Namrata Shah. They are supported by managing associate Ellie Tayler and associate Cassandra Smith.

Kirkland & Ellis International LLP, led by corporate partners Keir MacLennan and Rachael Coffey, is advising Huber. White & Case LLP is handling foreign direct investment and antitrust filings with a team including partners James Killick, Heather Greenfield, Orion Berg, and Michael Engel.

Financial Structure and Shareholder Impact

Tate & Lyle will partially fund the cash portion of the deal through a new $600 million bridge-financing loan provided by Citibank. Additionally, Tate & Lyle will issue 10 million shares to Huber after two years if Tate & Lyle's share price reaches at least £10.

Following the announcement, Tate & Lyle's shares dropped 6.57% to 632.50 pence from 677 pence on Wednesday. Russ Mould, investment director at AJ Bell, noted investor concerns about the scale of the deal, highlighting that large acquisitions can often destroy shareholder value if not executed correctly.

Strategic Implications

Nick Hampton, CEO of Tate & Lyle, emphasized that the acquisition will position the company to benefit from trends favoring plant-based, clean-label, and sustainable ingredients. The deal will create a leading global specialty food and beverage business.

Gretchen W. McClain, CEO of Huber, stated that the deal "unlocks the full value of CP Kelco and our long-term partnership as a shareholder in Tate & Lyle signifies Huber's long-term desire to remain engaged in the attractive food and beverage market."

Regulatory and Shareholder Approval

The deal is classified as a Class 1 transaction under the U.K. Listing Rules, requiring approval from more than 75% of Tate & Lyle shareholders. However, upcoming changes to the U.K.'s Listing Rules may remove this requirement if implemented before the end of August. The acquisition is also subject to regulatory approvals, with the companies expecting the deal to close by the end of 2024.

Tate & Lyle $1.8B CP Kelco Deal : Financial Advisors

Greenhill & Co. International LLP, Citigroup Global Markets Ltd., and Goldman Sachs International are acting as financial advisers to Tate & Lyle. BofA Securities is serving as financial adviser to Huber.