Tate & Lyle has sold Western Sugar.
The sugar giant is set to leave the turbulent US market. Tate & Lyle has announced the sale of its Western Sugar beet business and is negotiating the sale of Domino Sugar, which would complete the company’s exit from the US. Through the slim-lining of its portfolio Tate may be able to save itself from further profit falls.
If the potential buyer, Rocky Mountain Sugar Growers Co-operative, succeeds in raising the necessary financing, Tate & Lyle will offload its problematic American venture, the Western Sugar Company, netting a valuable $96 million.
Although Domino is the leading sugar brand in the US it has proved a liability for Tate. Profits have fluctuated wildly and the company has experienced losses over the past two years. Western Sugar has suffered similarly. Tate’s sale of these two companies should prove strategically sound for the company.
The stock market seems to agree with the company’s actions as its share price rose 15p to 274p with the announcement of the sale. This, however, is still a long way from the 800p plus it cost to buy Tate shares in 1988, when the company bought Domino. The past 18 months have been Tate’s most troubled time on the stock exchange. Share prices have fallen over 200p as it has been forced to issue several profit warnings.
The deals are part of Tate’s strategy to purge itself of all interests in non-core or loss-making businesses. The company then intends to boost performance through concentrating on its value added operations, which it hopes offer solid future earnings. The sale of Western Sugar will undoubtedly help stabilize the company’s performance, and if the Domino transaction can be completed Tate’s portfolio will look far more reliable.
Furthermore, if it reinvests the proceeds effectively this move could mark a complete turnaround in its fortunes.
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