Tate & Lyle makes sweetener settlement

AE Staley, the UK subsidiary of London-based Tate & Lyle, joins US firms ADM and Cargill, which have respectively already made $400 million (€331m) and $24 million (€19.8m) settlements under the same lawsuit.

"Staley continues to deny emphatically involvement in any wrongdoing, but has settled with great reluctance to ensure an end to this lengthy action and to avoid the risk and uncertainty that a US jury trial would involve,"​ said Tate & Lyle in a statement today.

Ignited in the early 1990s, the settlement has its roots in a law case filed by over 20 plaintiffs, including Coca-Cola and PepsiCo, which accused the sweetener businesses of linking up to fix prices of the sugar substitute.

High fructose syrups, known as isoglucose in Europe, kicked off in the US in the 1970s when the country developed new technologies to process this bulk calorific sweetener. The ingredient, an alternative to sucrose, rapidly gained in popularity and is now used extensively by the soft drinks makers.

In the class-action lawsuit filed in 1995, the plaintiffs called for $1.6 billion in damages as a result of actions by the sweetener businesses. The case had been scheduled for a September 2004 jury trial and the US and UK firms could have faced damages three times this amount to nearly $5 billion, as jurors could have tripled any award if they found the companies guilty.

"This agreement does not involve any admission of liability but does remove the uncertainties hanging over Staley from these proceedings,"​ said Robert Gibber, Tate & Lyle's general counsel.

Speculation as to how much, when, and if, the UK firm would settle out of court has been growing since Cargill, and most recently ADM last month, had agreed on a payout figure before the jury trial.

When Tate & Lyle announced its annual results in June, referring to the lawsuit, the firm said it would continue "to seek a negotiated resolution of the claim so as to avoid facing the cost and uncertainty of a US jury trial"​. Adding that "there is no certainty that it will succeed in reaching a settlement, nor as to the amount of any settlement"​

At the time, ABM Amro, Tate & Lyle's broker, played the potential settlement figures down, "not necessarily expecting that Tate will face the same liability"​, because ADM's US HFCS market share of 41 per cent is significantly greater than Tate's 15 per cent share, "and its payment may reflect other factors"​. At a quarter of ADM's payout, the $100 million settlement announced by the UK maker of low-cal sweetener Splenda today reflects this market share.

Tate & Lyle said the damages are expected to be tax deductible in the US, equating to a charge of $60 million (£33 million) on an after-tax basis.