Tate & Lyle sharpens ingredients focus with GC Hahn acquisition
- April 16, 2007
||company acquisition agreement signed in April 2007
||G.C. Hahn & Co. (Germany), global food stabiliser systems producer
||Tate & Lyle plc (UK), leading international industrial ingredients producer
||family owners of GC Hahn
||global platform for specialty dairy ingredients, enhanced European sales network
||attractive valuation, family succession issues
||Hahn family to retain 20% of shares under optionsâ agreement
This deal is significant as a valuation marker for mid-sized ingredientsâ deals. Also, it confirms a sharpening of Tate & Lyleâs focus on value-added and ârenewableâ ingredients, and a further shifting of the Groupâs balance away from commodity sugar. On top, the fact that GC Hahn was a long-term customer gives an emphatic âmoving downstreamâ 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 ingredientsâ standards, as high at the P /EBITDA level as Givaudanâs acquisition of Quest from ICI, itself seen as at a premium to comparative transactions. Thereâs also the unknown of GC Hahnâs 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 theyâve 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. Whatâs more, Hahnâs 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 & Lyleâs 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 âpure-playâ ingredients company. This GC Hahn deal goes along the grain of such thinking. All the more so, given how it dove-tails with the Groupâs recent announcement that itâs investing in an R&D centre in Lille that will focus on developing âwellness and nutritionâ food ingredients.
Thereâs a sad private twist to this deal. Itâs not in the typical profile of a German âmittelstandâ company to be acquired by a larger group unless thereâs 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 â a teacher by education and profession. This is not the only case of ill-health and tragedy changing the fortunes of a âmittelstandâ company.