LONDON — Tate & Lyle PLC has entered into an agreement to sell a controlling stake in a new company and its subsidiaries (NewCo) to KPS Capital Partners, LP. NewCo includes Tate & Lyle’s Primary Products business in North America and Latin America and its interests in Almidones Mexicanos SA de CV and DuPont Tate & Lyle Bio-Products Company, LLC joint ventures. Under terms of the agreement, Tate & Lyle and KPS will each own 50% of NewCo, and KPS will have board and operational control.

The transaction values NewCo at approximately $1.7 billion, equivalent to a multiple of 5.1x EBITDA for the year ended March 31. Tate & Lyle expects to receive gross cash proceeds of approximately $1.3 billion, or net cash proceeds of approximately $1.2 billion after customary adjustments and transaction costs. Following completion of the transaction, the board expects approximately $700 million will be returned to Tate & Lyle’s shareholders through a special dividend and associated share consolidation.

The proposed transaction creates two standalone businesses. Tate & Lyle will be repositioned as a global food and beverage solutions business focused on fast-growing specialty markets. NewCo will be positioned as a supplier of plant-based products for food and industrial markets.

Tate & Lyle’s Primary Products business produces nutritive sweeteners, industrial starches and acidulants. NewCo’s operations will include corn wet mills in Decatur, Ill.; Lafayette, Ind.; and Loudon, Tenn.; acidulants plants in Dayton, Ohio, and Duluth, Minn., and Santa Rosa Brazil; 50% shareholdings in the joint ventures Almex in Guadalajara, Mexico, and Bio-PDO in Loudon; and a grain elevator network and bulk transfer stations in North America. Primary Products’ European operations, which represented approximately 5% of Primary Products revenue in the year ended March 31, are not included in NewCo and will remain with Tate & Lyle. In the year ended March 31, NewCo generated revenues of £1.7 billion ($2.01 billion) and adjusted operating profit of £165 million ($195.56 million) on a pro forma basis.

The transaction is expected to be completed in the first quarter of 2022 and is subject to approval by Tate & Lyle’s shareholders, anti-trust clearances and other customary conditions.

“Today’s announcement represents the next phase in the evolution of Tate & Lyle,” said Nick Hampton, chief executive officer of Tate & Lyle. “Our one strong company will become two stronger businesses, both in a position to pursue new and exciting growth opportunities in their respective markets.

“Building on the strong platform established over the last three years, the proposed transaction will transform Tate & Lyle into a purpose-led, global food and beverage solutions business, serving faster growing specialty markets. With our new focus and a step-up in R&D investment, innovation and solutions development, we will be able to significantly enhance how we serve our customers and accelerate growth. Our deep scientific expertise, unique product portfolio and leading technical capabilities in sweetening, mouthfeel and fortification position us very well to benefit from growing consumer demand for food and drink that is lower in sugar, calories and fat, and with added fiber. With the pandemic accelerating the trend towards healthier food, now is the right time to focus our business on capturing this growth.”

KPS Capital Partners is a global private equity firm headquartered in New York with controlling equity investments in companies across various industries. Its portfolio companies generate nearly $11 billion in annual revenue and operate 149 manufacturing facilities in 22 countries with more than 35,000 employees.

“KPS and Tate & Lyle have complete alignment of interests and have cemented a partnership based on shared values such as the safety of our respective employees and a demonstrated commitment to sustainability,” said Michael Psaros, co-founder and managing partner of KPS Capital Partners. “KPS believes that Primary Products is a superior investment opportunity and that there is a tremendous opportunity to materially increase revenues, productivity and profitability. We look forward to working with the existing Primary Products management team and its employees to build on the great platform they have established and drive future growth.”