Broker snap: Tate & Lyle gets good price for business

1st Jul 2010 13:02

The market seems sweet on Tate & Lyle's decision to offload its sugar refining business, with the shares being one of the few to make headway on Thursday morning.The sale price of the business, £211m, was ahead of the £150m to £175m range Panmure Gordon had been expecting, and gives the company more firepower to progress its strategy of focusing on added-value food ingredients."A very welcome move by Tate at a good price, without leading to any material change to earnings forecast. We think a rerating of Tate is warranted and are raising our price target from 440p to 500p, equating to c.11.7x PE [price/earnings] and 7.2x EV/EBITDA [enterprise value/earnings before interest, tax, depreciation and amortisation] for March 2011E [financial year to end-March 2011]," the broker said. The broker is sticking with its "hold" rating for the stock.