Ingredion Incorporated Barclays 19th Annual Global Consumer Conference

who was appointed President and CEO of Ingredion in January of 2018, elected to the board of directors in September 2017, and now serves also as Chairman of the Board. Given the announced acquisition plan for Tate & Lyle, Jim will address the deal in his opening remarks, and our focus during the fireside questions will be on current business developments. With that, Jim, please go ahead.

Thank you, Ben, and it's a pleasure to be back at the Barclays Conference. It's been a busy year for Ingredion as we continue to transform our portfolio, our business, and as you'll see with the announced acquisition of Tate & Lyle, to continue to create the future of food on behalf of our customers and with our customers. Let me get right into it. Obviously, anything I say today will be protected by the safe harbor provisions in the forward-looking statements. For those of you that are not familiar with Ingredion, I just wanted to give you a quick snapshot. We're a global ingredient solutions provider. We've been around for a long time, more than 100 years. Revenue is $7.2 billion. We're traded on the New York Stock Exchange. Market cap $6.6 billion, as you can see.

Most importantly is the global reach and the extensive customer intimacy, 15,000 customers around the world, and ship and sell products in 120 countries around the world. Our business, we re-segmented it a few years ago, and it's a combination of global and/or multi-regional, multi-country segments. One is Global Texture and Healthful Solutions, about a third of our revenue. Food and Industrial Ingredients LATAM, you could see also about a third of our revenue. Food and Industrial Ingredients US/Canada, about 30%. Other Businesses, which is made up of the Pakistan business, which we recently sold a majority stake in, as well as our sugar reduction and protein fortification businesses.

Seventy-five percent sold to food and beverage, 20% approximately sold to non-food applications, which would be industrial, but also into pharma and personal care businesses, which are increasingly becoming larger and important and higher margins and growing fast. We grind a lot of corn, and we sell that for animal nutrition. The cash flow, the strong cash flow that the business has generated over the last three years, we've generated more than $1 billion of cash each and every year. This year, projected $700 million-$800 million. A lot of that comes from the food and industrial ingredient segments that we then are investing into the faster-growing Texture and Healthful Solutions business. These are the three segments, and they're scalable. They are profitable businesses in their own right.

They are all about working with customers to enable customers to generate consumer-preferred innovation through the ingredients we supply to give them a front-of-pack labeling differentiation. For example, texture, a certain texture, a certain crispness or crunchiness or velvety texture, or a protein-fortified claim, or the ability to reduce sugar. We are all about influencing front-of-pack claims and consumer-preferred innovation. The Global Texture & Healthful Solutions business I wanted to highlight because it is at the center of the strategy for the acquisition to acquire Tate & Lyle. Tate & Lyle is going to bring $2.7 billion of revenue. This business, $2.4 billion. Together, more than $5 billion. With the combined company, it will be more than 50% of our revenue. This business has been doing very well.

Nine consecutive quarters for net sales volume growth this past quarter 2, and the second highest operating income in the business's history. The operating margin, which you can see going back from 24%, 25%, and you can see in this most recent quarter at 18.7%, continuing to increase its margins. A lot of focus on solution selling, which inherently have higher margins, and also just higher growth rates as well. We have been reshaping our portfolio, transforming our portfolio over a number of years, if you have been tracking us over, say, the last decade. Most recently, in the last couple of years, we divested our South Korea business. That was a business that had exposure to high-fructose corn syrup and industrial starch pretty much. We divested that. We sold it at a multiple above our current multiple or the multiple at the time, and we generated $250 million of proceeds.

Most recently, in June, we divested the majority stake, 51% of our position, which we held for many years, many decades, in Pakistan. It was a great business at the time, but not strategic to where we want to take the portfolio into the future, more towards higher-value specialties. It was a business that was exposed to textiles and also into glucose syrups predominantly. We generated $165 million of net proceeds from that. Also, we announced most recently last year the closure and execution of the Alcântara facility in Brazil outside of Rio, and then invested in our Mogi Guaçu facility, and that went off seamlessly. Most recently this year, announced the closure and divestment of our Cabo facility.

The big news was on June 8, where we announced the intended acquisition of Tate & Lyle. Significant enterprise value of $5 billion. It adds to our texture portfolio, mouthfeel, fiber fortification, and sugar reduction capabilities. We also announced a stronger entry into India. For the last couple of years, we have made acquisitions in pharma for India. I think of it this way, taking the investments in Pakistan and basically putting them into the most populous country in the world that is growing at a nice clip, but also a very strong pharma presence and a lot of upside in food ingredients as well. We partnered with a very strong company called Sanstar, one of the leading corn wet millers, a good family-owned business, but also publicly listed in India, and had cultivated that relationship for a number of years.

Then consolidated an acquisition of a company called Mannitab for pharmaceutical excipients, also in India as well. The net effect is we are transforming the portfolio to a higher growth, higher margin mix. Again, with Tate & Lyle, more than 50% of the portfolio in Texture & Healthful Solutions. As you can see, the revenue will get to approximately $10 billion and the EBITDA at $1.8 billion. You can see the fact that there is really two complementary portfolios. Really what it does is it creates more scale for us to service our customers. That portfolio will give us an ability to provide more differentiated value, specifically through solution selling.

Both companies focus more and more on solution selling, but think of it as adding more tools to the toolbox to provide more textural innovation, more sugar reduction solutions, and more fiber fortification, which are highly on-trend as the reformulation boom takes place, appealing towards increased regulation around products to be healthier, more clean label, and also enables us to also provide more affordable solutions as well. The other thing that it does is it provides a complementary network of supply with more inherent, just naturally built-in redundancies of supply. That is something that we are hearing from customers they are very pleased about because of what they went through during the pandemic, during the supply chain crisis, but also what is happening right now geopolitically with increasing tensions related to tariffs or related to energy prices.

Having reliable supply is one of the things also that we think is going to position us as a preferred supplier with this combination. It makes it very compelling. It makes us better positioned to serve consumer needs and address industry trends such as clean label, again, affordability, sugar reduction. We call them multi-sensory experiences, which is textural innovation. For those of you that have been tracking the food space and have been reading a number of the food articles in the last 1-2 years, you are hearing more about texture being positioned as the new flavor, multi-textured foods. You are familiar with boba tea, boba tea now making its way into pudding-like products. Consumers looking for different eating experiences and companies looking to drive innovation and drive overall liking for products that will taste interesting and great, influenced by texture.

Ingredion, with this acquisition, intends to be the go-to provider for texture and healthful solutions that make healthy taste better. Then you can see also pharma at home and personal care. The other thing that this acquisition will do, both companies have not so well-known areas of focus in the area of skin and hair care as well. These are businesses that are now not so small. They are two, $300 million businesses. Combined, it is going to be even larger, growing at high single digits and higher profit margins as well. So the acquisition is very compelling on that front.

And really, the way we go to market with solutions is it starts with bringing consumer insights, talking the same language as our customers, then developing a co-creation brief where there's skin in the game on both sides, then really customized formulations, then helping them scale the products up. An interesting statistic, we don't work with just large CPG companies. We're working with private label manufacturers. We're working with insurgent brands as well. Most of the volume growth, the very elusive volume growth that's happening in the food industry, where it's happening, is coming from insurgent brands. We are partnering with a lot of these insurgent brand companies, especially in the areas of protein fortification, sugar reduction, and all of that. This acquisition, we believe, brings complementary capabilities to drive a higher margin mix. The acquisition will deliver $130 million of cost synergies.

That's not taking into account any cross-selling or revenue synergies. That's 4.8% only on the stated revenue of Tate & Lyle, which is something we think is very achievable. We have to execute that, but it's very achievable. It's not something that we think is overly stretchy. You can see what that will do to the adjusted EBITDA once we complete the acquisition. When the acquisition completes, which it's scheduled to complete in the second half of next year, we'll be at 3x leverage with a commitment based on their own inherent cash flow and based on our own strong balance sheet to take our targeted leverage down to less than 2.5, 18 months post the close.