French swoop on troubled De La Rue

By Geoff Foster for MailOnline
Updated: 02:50 EDT, 6 December 2010

Shares of struggling bank note printer De La Rue should be in big demand today following a Sky News report that its board recently rejected a £750m bid approach from French rival Oberthur Technologies.

Top customer: British government may baulk at prospect of French producing sterling or biometric passports

The firm, which also prints the next generation of British passports, said the offer 'undervalued' its shares, which have already crashed this year after it revealed a paper batch quality problem with its biggest customer - widely thought to be India's central bank.

Oberthur, which in 1999 acquired the smartcard division of De La Rue, is now believed to be weighing up its options.

It could decide to increase its offer and if it does, De La Rue's shareholders, including the Prudential and M&G, could put pressure on the board to accept.

A French takeover of De La Rue would surely reignite the ongoing debate about the foreign ownership of British companies, which has raged ever since the controversial takeover of Cadbury by Kraft Foods.

The Government might also be unhappy with the prospect of the production of sterling or biometric passports transferring across the Channel. The Bank of England and the UK Passport Agency are two of De La Rue's most important customers.

Acquisitive industrial company Melrose has also been tipped as a possible buyer of De La Rue, which has rendered itself vulnerable to a takeover following an horrendous year.

Its shares collapsed from £10-plus to a year's low of 541p on profits warnings and news of problems at its plant in Overton, Hampshire, that have cost £35m in lost sales and other charges.

They have rallied to 647.5p on hopes that a predator will put it out of its misery.

City analysts have begun to recommend the stock to clients on consideration of the company's recovery potential.

Broker Collins Stewart says De La Rue's assets are unique, especially the intangible ones.

The company prints money for 150 countries. A large chunk of them are former British colonies where the relationship goes back decades.

On brand it is considered the world leader and is at the forefront of technological investment to keep ahead of the counterfeiters.

The broker values the group at £728m - or 736p a share - so Oberthur will have to substantially increase its offer before the De La Rue board agrees to a deal.

Both companies last night refused to comment on the speculation.