Tate & Lyle has agreed to sell a controlling stake in its commercial sweeteners division in the Americas to KPS Capital Partners in a $1.3bn deal as the food group pivots towards healthier products.

The division, which also makes industrial starches, generates most of Tate & Lyle’s £2.9bn annual revenues. The London-listed company announced in April that talks were under way with potential buyers.

The 162-year-old group, once a leading global operator in the sugar industry, will retain a 50 per cent share in the business, which focuses on plant-based products for the food and industrial markets.

“This is the transaction investors have been waiting a decade for,” said James Targett, an analyst at Berenberg. “Ultimately, we now expect a material re-rating of Tate.”

New York-based KPS becomes the latest private equity group to strike a deal for a UK-listed business, securing board and operational control with its stake. Tate & Lyle expects to receive gross proceeds in cash of about $1.3bn. The deal gives the business an enterprise value of $1.7bn.

“The proposed transaction represents an ambitious and bold step forward for Tate & Lyle,” said Nick Hampton, chief executive of Tate & Lyle.

The move is designed to enable the London-based group to focus on its higher-growth food and beverage arm, which helps companies such as Mondelez and Nestlé replace sugar, salt and fats in their products.

“We help our customers take sugar calories out of food and add good stuff back in while maintaining taste,” added Hampton.

The company aims to increase revenues by mid-single digits and raise margins by 50 to 100 basis points annually for five years.

Once the transaction is complete, which is expected in the first quarter next year, the board intends to return about £500m to shareholders in a special dividend.

Tate & Lyle planned to retain remaining proceeds for further investment and to strengthen its balance sheet, the company said in a statement on Monday. “M&A on top of that is something we’ll look at,” said Hampton.

The new company will comprise Tate & Lyle’s primary products business, which makes bulk sweeteners used in fizzy drinks and industrial starches, in North America and Latin America, including corn mills in the US, and a 50 per cent stake in a joint venture in Mexico.

Hampton said Covid-19 had accelerated customer demand for healthier food and drinks, considering higher mortality rates from the virus among overweight people.

“Consumers are a lot more educated about what they put in their bodies. The pandemic has put the focus on those who are more vulnerable.”

The FTSE 250 company’s roots stretch back to 1859 and it expanded along with the British empire to become a household name.

In 2010, the company sold its sugar business including Lyle’s Golden Syrup as it began to shift towards reformulating processed foods to make them healthier.

The company’s share price rose 1.7 per cent on Monday to £7.74 a share.