Tate & Lyle sells more

Tate & Lyle has hoisted a 'for sale' sign over its European starch business in a radical bid to reduce its exposure to low-margin commodity-driven ingredients.

The prices of ingredients produced by the division, such as isoglucose, are linked to the price of sugar, and would go down as sugar prices fell - without any compensation payments, said the chief executive Iain Ferguson.

"The decision to explore a full or partial disposal is in response to the consequences of far-reaching reform to the EU sugar regime and builds on the recently announced consultation on the surrender of quota in our Eastern Sugar joint venture," he said.

The starch division, with an operating profit of £46M on sales of £719M in the year to March 31, has 15 plants in Europe, including an isoglucose and animal feed plant in Greenwich in London.

Tate & Lyle announced last month that it would renounce its quotas in central Europe and close five sugar beet processing facilities in Hungary, the Czech Republic and Slovakia.

A City analyst said: "Operating profits in the food and industrial ingredients division will move downwards in the next few years as the sugar regime kicks in. By 2011, we're looking at about £28M for the division, which makes it a pretty low-margin business considering it's turning over £719M. "If this industry is going to be more profitable, there will need to be consolidation, so maybe companies like Cargill, ADM and Roquette might be interested. However, I can't see it attracting a price tag of much more than £300-350M."

A Cargill takeover could lead to a competition inquiry.