January 21/Business Monitor International Ltd. (BMI) -- Cargill has been cited as a possible bidder for U.K.-based ingredients firm Tate & Lyle. The research note form brokers MF Global suggested that Cargill's spinoff of its fertilizer operations Mosaic could give the firm the financial flexibility to pursue acquisitions and a move for Tate & Lyle would help consolidate the U.S. high-fructose corn syrup market. Tate & Lyle's share price reacted very positively to the report and at one point was up by over 8% (on January 20). BMI recognizes the merits of such a move, with Tate & Lyle currently trading with a low price-to-earnings ratio due to what it views as an uninspiring product pipeline and limited opportunities for future transformational growth.
By reducing its debt commitments, Cargill would be in a stronger position to make acquisitions, particularly given the firm's strong earnings on the back of rising commodity prices. BMI sees Tate & Lyle as a strong fit at an attractive price. However, it would not be an adventurous move, and Cargill may have something more ambitious up its sleeve, with an acquisition that would help broaden its exposure to emerging markets perhaps a more exciting possibility.