De La Rue rejects $1.4 billion approach from Oberthur

By Matt Scuffham

LONDON (BestGrowthStock) – Weakened British banknote printer De La Rue rejected a takeover approach worth 895 million pounds ($1.4 billion) from French rival Oberthur Technologies, calling it “highly opportunistic.”

De La Rue shares closed up 30 percent at a 20-week high of 843 pence Monday, well below the indicative proposal of 905 pence, but recovering much of the ground lost since it revealed production problems at one of its factories earlier this year.

Privately-owned Oberthur, the world’s third biggest banknote maker which said its proposal was made on November 10, left the door open for a new approach.

“Oberthur wishes to make clear that it hopes it can agree a basis for the board of De La Rue to recommend an offer,” it said.

De La Rue, whose shares have shed nearly 40 percent of their value since March after detailing the production problems, said its long-term value should not reflect current issues management was addressing, pointing to “world-leading” positions in growth markets with high barriers to entry.

“The board had no hesitation in rejecting this highly opportunistic and preliminary proposal which does not begin to reflect De La Rue’s fundamental value,” the firm said.

Investec analyst Guy Hewett said Oberthur could have to go as high as 1,000 pence for an agreed deal.

“We are highlighting the 900-1,000 pence range as likely to be necessary in order to get support,” he said. “While the short term quality problems are material De La Rue has a very strong market position, in a market that has little spare capacity, to produce an obviously valuable product.”

De La Rue, the world’s biggest banknote printer which issued a profit warning in September, said on November 23 that production difficulties could lead to the loss of a top customer for whom faulty banknote paper had been produced.

While the company did not name the client, newspaper reports identified it as The Reserve Bank of India.

UBS analyst Alex Hugh said the key question would be whether another bidder would be tempted to come in.

He said a rival bid from private equity would be a possibility although they were likely to remain sidelined until there was clarity over the India contract.

He said German banknote printer Giesecke & Devrient (G&D), the world’s second biggest banknote printer, could be a potential bidder although he added such a deal could have regulatory obstacles as the combined group would have 90 percent of the global outsourced banknote market and overlapping contracts in many regions.

G&D declined to comment.

(Additional reporting by James Davey; Editing by David Cowell)

($1 = 0.6338 pound)

De La Rue rejects $1.4 billion approach from Oberthur