Tate & Lyle to acquire leading dietary fibre business in China

Tate & Lyle PLC, a leading global provider of food and beverage ingredients and solutions, announces that it has signed an agreement to acquire Quantum Hi-Tech (Guangdong) Biological Co., Ltd (Quantum), a leading prebiotic dietary fibre business in China from ChemPartner Pharmatech Co., Ltd (ChemPartner) for a total consideration of US$237 million.

          Key highlights:

·       Fully aligned to strategy to become growth-focused food and beverage solutions business

·       Strengthens position as a leading global player in fast-growing global dietary fibres market

·       Adds new, speciality and complementary products to portfolio

·       Brings strong R&D expertise with proprietary manufacturing processes and technologies

·       Strengthens fortification platform and enhances integrated solutions capabilities

·       Significantly extends presence and customer offering in China and Asia

·       Expected to be accretive to revenue growth and EBITDA margin in first year of ownership

·       Completion expected in the second quarter of 2022 calendar year.

 
Quantum engages in the research, development, production and sale of fructo-oligosaccharides (FOS) and galacto-oligosaccharides (GOS).  Together, FOS (from sucrose) and GOS (from milk sugar/lactose) represent around 25%² of the global dietary fibres market which is forecast to grow at around 6% per annum³.  In China, which currently represents the majority of Quantum's sales, the FOS and GOS market is forecast to grow at around 10% per annum³.

The acquisition of Quantum significantly strengthens Tate & Lyle's position as a leading global player in dietary fibres, bringing a high-quality portfolio of speciality fibres, strong R&D capabilities and proprietary manufacturing processes and technologies.  The acquisition expands Tate & Lyle's ability to provide added-fibre solutions for its customers across a range of categories including dairy, beverages, bakery and nutrition (including infant nutrition), and to meet growing consumer interest in gut health.  It also significantly expands Tate & Lyle's presence in China and Asia, and extends its capabilities to create solutions across food and drink utilising its leading speciality ingredient portfolio.

The transaction is subject to approval by the shareholders of ChemPartner, a public company listed in China, of which Quantum is a wholly-owned subsidiary.  At completion, consideration⁴ will be paid in cash for 100% of the equity interests in Quantum.  For the 11 months ended 30 November 2021, Quantum generated revenue of US$46 million and EBITDA of US$14 million⁵. The acquisition is expected to be accretive to revenue growth and EBITDA margin for Tate & Lyle in the first year of ownership.

Quantum produces its range of FOS and GOS fibres at its production site in Guangdong Province, Southern China. The management team of Quantum will join Tate & Lyle at completion.  Closing of the transaction is expected to occur in the second quarter of calendar year 2022.

Nick Hampton, Chief Executive at Tate & Lyle, says: “We are delighted to announce the agreement to acquire Quantum, a leader in prebiotic dietary fibres and a business recognised for its high-quality ingredients and solutions. This acquisition significantly strengthens our fortification capabilities and expands our customer offering in key food and drink categories. FOS and GOS are highly complementary to our existing fibre portfolio and will enable us to offer a broader range of solutions to our customers.  The acquisition is also very much in line with our purpose to support healthy living by improving gut health, and driving sugar and calorie reduction and fibre fortification for consumers across the world.”

Mr. Zeng Xianwei, Chairman of the Board of ChemPartner, says : “We are proud of the Quantum business we have built over the last 20 years, providing high-quality products to support healthier living for people across China and beyond.  Tate & Lyle, with its global customer reach, strong focus on R&D, and strong fibre portfolio, is the ideal company to take Quantum on the next stage of its development.  I wish them and the management team at Quantum success in the future.”

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1.    Tate & Lyle already offers a broad selection of soluble fibre solutions, such as its PROMITOR^® Soluble Fibre and STALITE^® Polydextrose, with distinctive benefits for many food and beverage categories. These enable sugar and calorie reduction as well as fibre fortification, helping to support healthier lifestyles and provide nutritional benefits, while maintaining great taste.
2.    Company analysis from sources including Maia Research Global Short Chain Fructo-oligosaccharides Market Research Report 2021
3.    Volume growth (2021 - 2026); Company analysis including Maia Research Global Short Chain Fructo-oligosaccharides Market Research Report 2021
4.    Consideration is on a cash-free, debt-free basis, and subject to customary working capital adjustments
5.    Depreciation and amortisation charges together for the 11 months ended 30 November 2021 were US$2 million
6.    As at 30 November 2021, the gross assets of Quantum were US$41 million.
7.    On a pro forma 12 months basis, calculated by extrapolating the financial information for the 11 months to 30 November 2021, Quantum has annual revenue of US$50 million and EBITDA of US$15 million.