Glenboden M & A Originations

Tate & Lyle sharpens ingredients focus with GC Hahn acquisition

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Origination Status company acquisition agreement signed in April 2007
Asset G.C. Hahn & Co. (Germany), global food stabiliser systems producer
Buyer Tate & Lyle plc (UK), leading international industrial ingredients producer
Seller family owners of GC Hahn
Buyer Rationale global platform for specialty dairy ingredients, enhanced European sales network
Seller Rationale attractive valuation, family succession issues
NBs Hahn family to retain 20% of shares under options’ agreement
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This deal is significant as a valuation marker for mid-sized ingredients’ deals. Also, it confirms a sharpening of Tate & Lyle’s focus on value-added and ‘renewable’ ingredients, and a further shifting of the Group’s balance away from commodity sugar. On top, the fact that GC Hahn was a long-term customer gives an emphatic ‘moving downstream’ icing-on-the-cake for Tate & Lyle.

Depending on how concentrated and high-entry-barrier the segments are in which Hahn competes, the valuation looks quite high by ingredients’ standards, as high at the P /EBITDA level as Givaudan’s acquisition of Quest from ICI, itself seen as at a premium to comparative transactions. There’s also the unknown of GC Hahn’s long-term debt, likely to be high as with most mittelstand companies, in which case the enterprise valuation is even higher.

On the hand, Tate & Lyle may have considered that in absolute terms they’ve relatively cheaply bought a specialty ingredients platform, at a time of accelerated food innovation notably in dairy where Hahn is a leader, with a global presence covering 34 countries. What’s more, Hahn’s four production facilities, located in Germany, UK, USA and Australia boldly cover the whole globe and, conveniently for Tate & Lyle, are mostly in English-speaking countries.

Recently we reviewed Tate & Lyle’s divestment of its Canadian packaged sugar business, Redpath. We suggested that perhaps the Group should divest the whole of its under-performing packaged sugars businesses, and become a ‘pure-play’ ingredients company. This GC Hahn deal goes along the grain of such thinking. All the more so, given how it dove-tails with the Group’s recent announcement that it’s investing in an R&D centre in Lille that will focus on developing ‘wellness and nutrition’ food ingredients.

There’s a sad private twist to this deal. It’s not in the typical profile of a German ‘mittelstand’ company to be acquired by a larger group unless there’s a succession problem in the family. All the more a company like GC Hahn, with its global platform and handsome 10% EBITDA margin. It transpires that Georg Hinrich Hahn, of the 5th generation of owners, died suddenly and very young in 2002, leaving the business to be run by his sister Katharina – a teacher by education and profession. This is not the only case of ill-health and tragedy changing the fortunes of a ‘mittelstand’ company.

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THIS LEAD'S VALUATION
Size (€ mln) 145
Sector ingredients
Asset Quality global b2b niche
Seller family
Buyer large plc
P/S 1,4
P/Ebitda 14,5
Type equity value
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