Corn Products Drops Commodity Image With New Name: Ingredion

Nearly four years after its planned sale to a major commodity trader was torpedoed by the global financial crisis, Corn Products International Inc.'s (CPO) corporate transformation will culminate Monday with a name change to Ingredion Inc. (INGR).

The new name reflects the company's continued evolution into a food-ingredient company with broad offerings, and accompanies Wall Street expectations for greater investor returns, Corn Products Chief Executive Ilene Gordon said in an interview Wednesday.

"We know who we are, but it's important to say who we are to the outside world," she said.

The company's evolution from being mainly a maker of corn sweeteners and related products the past few years--highlighted by its $1.3 billion purchase of National Starch, a maker of specialty starches for soups, sauces and condiments in 2010--stems directly from its scuttled sale to Bunge Ltd. (BG), Gordon said.

The failed deal with Bunge, which fell through in November 2008 when the global financial crisis and tumbling share prices prompted Corn Products's board to rescind its support for Bunge's offer, left the company with a retiring CEO and a lack of direction. Gordon, hired in May 2009 after serving as CEO of Alcan Packaging, a subsidiary of Rio Tinto Group, was charged with refreshing the company's strategy, she said.

Corn Products, a suburban Chicago company that makes corn sweeteners such as high fructose corn syrup, told investors it was increasing its focus on food ingredients globally. The centerpiece of that strategy was the purchase of National Starch, whose geography and emphasis on starches complemented Corn Products's focus on sweeteners.

The size of that acquisition, as opposed to a series of smaller purchases, hastened the company's transformation, and, with it, the name change, Gordon said.

National Starch's portfolio, dominated by starches that provide texture to foods, has meshed with Corn Products's portfolio of sweeteners and heightened the company's profile among food manufacturers, she said.

"They now look at us as somebody who can formulate on the spot, which helps get it to market more quickly," she said.

Corn Products, which once owned widely known brands such as Karo corn syrup and Mazola corn oil, makes ingredients used throughout the grocery store, in products including bread, yogurt, fruit juices, ice cream and iced tea.

Often associated with other corn processors such as Archer Daniels Midland Co. (ADM), Corn Products is trying to position itself halfway between commodity handlers such as ADM, which have more capital-intensive businesses, and pure food-ingredient companies, such as Dublin-based Kerry Group (KRZ.DB, KRYAY), whose businesses revolve more around laboratory research.

"We're in the middle," Gordon said. That puts the company in a small category with London-based Tate & Lyle PLC (TATE.LN, TATYY), another longtime maker of corn sweeteners.

The increased emphasis on food ingredients has implications for investor returns. Gordon said commodity companies typically have a price-to-earningS ratio of about 10, compared to about 15 for pure food-ingredient concerns. She also said recently that increasing the company's dividend payout ratio to bring it in line with food-ingredient companies was "a priority."

Corn Products shares closed down 2% Wednesday at $51.28 a share, and are down 2.5% so far this year.

Corn Products shareholders are clearly better off than they would have been had the Bunge deal--valued at close to $5 billion--gone through, said Gordon, who wasn't with the company at that time. Shares of Corn Products have more than doubled since its board rejected the merger, while Bunge's are up 38%.

Corn Products's first-quarter profit was down 39% to $94.2 million, but much of the decline was because of a one-time settlement the prior year. Revenue increased 7% to $1.57 billion.

With Monday's name change to Ingredion, the company's ticker symbol will change to INGR.

-By Ian Berry, Dow Jones Newswires; 312-750-4072; ian.berry@dowjones.com; Twitter: @enberry

Corn Products (NYSE:CPO)
Historical Stock Chart
From Apr 2024 to May 2024