‘Wonder Sugar’ to Create a Stir As PureCircle Lists

By ROBERT LEA

THE supremacy of Tate & Lyle in the sweeteners industry could come under threat from a new AIM float that plans to storm the market with its naturally occurring zero-calorie wonder sugar, which is as yet banned in the UK and US.

PureCircle, under chairman Paul Selway-Swift, former deputy chairman of HSBC Investment Banking, is to join the junior market this week, raising around Pounds 20 million and valuing it at about Pounds 200 million. Its Reb-A sweetener, extracted from the stevia plant, has excited City analysts as they compare its potential with Splenda, the manufactured Sucralose sweetener that was created by and was expected to transform Tate & Lyle.

After a PureCircle investor roadshow last week, Numis analyst Nicolas Ceron said: “This could become a tough competitor for Sucralose in the medium term.” Downgrading his investment rating on Tate, Ceron added: “To us this is another step that shows that the competitive set in the high-intensity sweetener market is increasing.” Reb-A is extracted from stevia, native to Paraguay where it has traditionally been used to sweeten drinks but now grown for commercial purposes in China and Kenya.

PureCircle is raising the money to expand in Kenya with the expertise of the Finlay teas group, part of Hong Kong’s Swire empire, which is a 10% shareholder in PureCircle. It is also investing in a production plant in Malaysia.

The company is the brainchild of 33-year-old Russian-born scientist Magomet Malsagov, and its executives include ICI flavourings veteran Peter Milsted. It has an exclusive supply contract with American commodities giant Cargill, which has a deal with Coca-Cola to develop Reb- A-sweetened Coke for international markets in which it is not banned.

Stevia-extracted sweeteners are currently labelled an “unsafe food additive” in the US. They do not have licences in Europe either, with some medical reports suggesting it may cause impotence in men.

If, as PureCircle hopes, it does obtain US licences, the Coca- Cola link would see PureCircle’s profits surge to $138 million (Pounds 67 million) in 2009, according to the company’s broker Hanson Westhouse.

Tate & Lyle’s hopes for its own sweetener, the much-vaunted Splenda, appear to be unravelling. A warning at the beginning of this year that it had overpromised and underdelivered on the take- up of Splenda with drinks giants Coca-Cola and PepsiCo was the first of four profit alerts in 2007 that sent the shares plummeting.

Tate is likely to be ejected from the FTSE 100 in next week’s reshuffle.

But Tate & Lyle is not fazed by the arrival of PureCircle. “Stevia has been around for years and is currently not approved for use in either the US or EU as a sweetener,” a spokesman said.

“This is still early days, and significant hurdles exist to bring any such sweetener to large-scale commercial reality.”

(c) 2007 Evening Standard; London (UK). Provided by ProQuest Information and Learning. All rights Reserved.