US rival Bunge may be developing a taste for Tate & Lyle

Tate & Lyle is looking sweet, analysts at Cannacord Genuity said in a research note e-mailed to clients on Monday.

The company is expected to benefit from multiple tailwinds. Together with a now substantially greater possibility of a take-over attempt – given its current valuation - by US rival Bunge led analysts Alicia Forry and Eddy Hargreaves to up their recommendation on the shares to a ‘buy’ from a ‘sell’.

In parallel, the price target for the stock was hiked to 650p from 530p.

Among the potential positive catalysts for the stock cited were: the fact that a fourth profit warning in the near-term, following three over the last 12 months, appears low and the maker of sweeteners faces easy comparables in the next four quarters.

A strengthening US dollar and a boost to co-product income from rising corn prices should also prove favourable.

The low valuation of the shares, the stronger dollar and low interest rates, may all contribute to potential interest in a take-over bid from Bunge. At the moment Tate’s dividend yield – the company’s dividend pay-out as a proportion of its stock price – stands at 5%.

Forry and Hargreaves estimated that Bunge might be willing to scoop up Tate & Lyle at a 40% premium. The purchase would give the American firm greater exposure to value-added ingredients and expand its presence in corn milling. That has long been an area of interest for Bunge.