De La Rue rejects $1.4 billion approach from Oberthur

Thursday, 9 December 2010 00:01 -     - {{hitsCtrl.values.hits}}

LONDON (Reuters) - Weakened banknote printer De La Rue <DLAR.L> said it had rejected an approach worth 895 million pounds ($1.4 billion) from French rival Oberthur Technologies <FCOFDO.UL>, calling the approach opportunistic.

De La Rue shares were up 31 percent to a 20-week high at 847 pence by 4 p.m. on Monday, well below the 905 pence per share approach price, but recovering much of the ground lost since it revealed production problems at one of its factories earlier this year.

Privately-owned Oberthur, which said its indicative offer was made on 10 November, 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."

Earlier, De La Rue, which had seen the value of its shares drop nearly 40 percent since March following production problems at one of its paper factories, said it had received a "highly preliminary and opportunistic" approach from an unnamed party.

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

"We are highlighting the 900-1000 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, which issued a profit warning in September, said on 23 November that production difficulties could lead to the loss of a top customer for whom faulty banknote paper had been produced. While De La Rue did not confirm who the client was, 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, as 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.