Tate & Lyle has signed a deal to acquire US-based ingredients firm, CP Kelco, for £1.4bn.

Under the deal, the British food and beverage firm will acquire CP Kelco’s three divisions in the US, China and Denmark, from its current owner J.M. Huber Corporation.

In a statement, Tate & Lyle said that it expects the deal to create revenue synergies of up to 10% of the US firm’s revenue in the medium term, with targeted run-rate cost synergies of up to £40m by the end of the second full financial year.

The acquisition is part of Tate & Lyle’s "major strategic transformation" that it has been executing over the past six years.

Chief executive at Tate & Lyle, Nick Hampton, said: "A combination with CP Kelco is the perfect fit with Tate & Lyle's growth-focused strategy and purpose. It significantly strengthens our Sweetening, Mouthfeel and Fortification platforms, enhances our solutions capabilities across our four core categories, and unlocks new growth opportunities. Together, we will have a compelling customer proposition.

"We've been collaborating with CP Kelco on innovation projects for many years and are very aware of their excellent products and the outstanding capabilities of their people. We are excited about the opportunities the combination will create for customers across the world, and the opportunities for employees in both companies to develop their careers across a broader global business."

Investment director at AJ Bell, Russ Mould, said: "Getting a deal wrong is often the biggest pitfall for a corporate entity and large deals have a nasty habit of destroying rather than creating shareholder value.

"The deal is being funded through a mixture of debt and existing cash, so there is the potential for some strain on Tate & Lyle’s balance sheet. However, the decision to press ahead with a previously announced share buyback programme is a sign of confidence on this front. A lot will ride on the company’s ability to deliver the cost savings from combining operations and the promised improvements in revenue growth and margins.

"Tate & Lyle will hope this transaction will put the enlarged company in a good place to serve a market among food producers looking to make food which is healthier but still tasty enough to fly off the shelves. Areas like ‘mouthfeel’ – literally the way food or drink feels in the mouth – are easy to mock but are undoubtedly considered important in this industry."

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