Bunge may emerge as the buyer of Tate & Lyle from a potential consolidation wave in the sweeteners and starches industries which could also swamp UK minnow PureCircle, broker Evolution has said.
The note helped Tate shares to their highest level of 2010 in early deals.
Bunge executives may already have UK-based Tate "in their sights" with the aim of securing the position in corn processing that that the US agribusiness giant missed out on two years ago, when its $4.4bn all-share bid for Corn Products International collapsed.
"Tate would offer Bunge both sugar and US corn wet milling, two businesses that Bunge are open about wanting to build," Evolution analyst Warren Ackerman said.
The US group, the world's biggest oilseeds processor, could afford to pay £3.2bn for Tate – equivalent to 700p a share, a premium of nearly 50% on Friday's price - and still justify the deal to its shareholders, Mr Ackerman said.
Starch suitors
However, a Bunge-Tate deal was only part in a potential consolidation wave which has already seen Holland's Azko Nobel reveal several suitors for its food and industrial ingredients business National Starch.
|
Mechanics of a 700p-a-share bid
Offer in dollars: $10.29 per share
Number of shares: 457,
Equity value: $4.70bn
Enterprise value: $6.08bn (includes $977m of debt and $401m in pension liabilities)
Deal multiples: EV/ebitda, 9.1; PE, 15.4
Source: Evolution |
"We would suggest that Corn Products, Tate, Bunge, Cargill and possibly even Archer Daniels Midland are all possible suitors," Mr Ackerman said, valuing National Starch at about E1bn.
Tate may furthermore - in the face of waning US demand for the high fructose corn syrup produced by its mills - consider a takeover of PureCircle, manufacturer of the low-calorie sweetener Reb-A, which is based on the stevia plant.
"PureCircle could be a perfect hedge to the declining fortunes of high fructose corn syrup," Mr Ackemann said.
"If there are clear signs that Reb-A is becoming a mass market ingredient we cannot rule out the possibility that Tate will attempt to enter this market."
New boss
Mr Ackermann lifted his target price for Tate shares to 560p, from 525p, restating a "buy" rating, and noting also the group's potential for improvements under its own steam under new chief executive Javed Ahmed.
Mr Ahmed could "fundamentally reshape" a group which had under its previous leadership "gained the unwelcome reputation as being accident prone with a higher than average probability to profit warn".
Tate shares touched 471.9p – their highest since November - in early deals in London before giving back some gains to close 0.8% higher at 464.8p on a weak day for global stocks.
PureCircle shares finished 1.4% lower at 278p.
PRINTABLE VERSION
EMAIL TO A FRIEND
RSS FEEDS