(Alliance News) - Moody's Investors Service on Friday announced that it has downgraded Tate & Lyle PLC's rating to Baa2 from Baa3, due to doubts by the credit rating agency on the food ingredients company's decision to divest control over its North American sweeteners division for USD1.3 billion.
The firm has given the company a stable outlook rating.
The rating reflects Tate & Lyle's announcement on Monday that it will sell sell a controlling stake in a new company and its subsidiaries, comprising its Primary Products business in North America and Latin America and its interests in the Almidones Mexicanos SA de CV and DuPont Tate & Lyle Bio-Products Co LLC joint ventures.
The business generated GBP1.7 billion in revenue for the year ended March 31.
The sale is expected to generate an initial GBP900 million, subject to shareholder approval. T&L expects to return GBP500 million of the profits to shareholders.
Following the sale, Tate & Lyle will retain a 50% non-controlling stake and may be eligible for cash dividends.
"Today's rating action reflects our view that the proposed transaction will reduce T&L's scale and product diversity whilst moderately increasing its Moody's-adjusted gross debt to Ebitda ratio as the company intends to return more than half of the proceeds to shareholders and retain the balance to fund future growth," said Senior Vice President Roberto Pozzi.
"T&L's business focus will shift towards its more profitable and faster growing food and beverage solutions business, which may be strengthened by future acquisitions."
The stable outlook rating reflects increased liquidity from the sale as well as the expectation that the company will use the proceeds to grow its food and beverage business.
Tate & Lyle's shares closed up 2.1% at 729.20 pence in London on Friday.
By Aidan Lane; newsroom@alliancenews.com
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Tate & Lyle (TATE)