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Secure Transactions News

Oberthur still in talks to acquire De La Rue

Thursday 13 January 2011

The companies are now getting further into their investigations about a potential takeover. Early this year, Oberthur said it had “reason to believe that the most recent tender for the supply of 16,000 tons of currency paper by the Reserve Bank of India has been awarded to four competitors of De La Rue” and that De La Rue’s ability to retain customers had been undermined. Now, India's finance ministry has suspended its contract with U.K. banknote printer De La Rue but will not make a final decision on canceling or renewing the deal for two to three months. The source didn't say how much the contract is worth, but said that India accounts for 30% of De La Rue's total sales. Also, last year, De La Rue was under pressure when the British authorities were called in to investigate “deliberately falsified” tests on paper used to make bank notes.

Oberthur said its takeover offer of GBP 895 million (EUR 1,076 million) nonetheless stood. “We believe there are crucial questions that need answering from De La Rue in relation to India and the status of De La Rue’s relationships with its existing customers,” Jean-Pierre Savare, Oberthur’s president, said in a statement. A tie-up with Oberthur “would provide the catalyst for restoring De La Rue’s standing and reputation,” he added. It is said that a number of big De La Rue shareholders are preparing to press the case for the company to open talks with Oberthur.

Now, negotiations have been ongoing for a while. The U.K. takeover regulator on January 10th told France's Oberthur that it must announce a firm intention to make an offer for De La Rue by February 7 or walk away, setting a timetable for a takeover attempt that had threatened to drag on for months.

De La Rue asked the regulator to impose a deadline for Oberthur to make its intentions clear. If it decides not to bid, it will not be allowed to make another attempt to buy the printer for a further six months under U.K. takeover rules. Oberthur responded by urging De La Rue's shareholders to pressure the British company into clarifying the impact of last summer's production problems on its reputation and prospects, particularly with the Reserve Bank of India, before the deadline. Oberthur management said the Board of De La Rue has not yet articulated a meaningful response to its questions. The offer represented “compelling value” for a company that has “uncertain” standalone prospects, Oberthur said.

Tim Cobbold, who began as De La Rue’s new chief executive on January 1st,  urgently needs to restore confidence among big De La Rue customers and investors. He is due to meet its top investors over the next fortnight to present his strategy.