15-04-2025
De La Rue's final deal looks surprisingly positive
LONDON, April 15 (Reuters Breakingviews) - De La Rue's (DLAR.L), opens new tab rocky road on the public market may end on an unexpected high. On Tuesday, the UK banknote printer said, opens new tab it had accepted a 263-million-pound ($348 million) offer from U.S. private equity group Atlas. For a company that has spent years breaking itself up while battling seemingly terminal decline, it's a reasonable outcome.
De La Rue has been around for over 200 years. In its earlier life, the company expanded across the globe and ended up winning contracts from clients as diverse as the Bank of England and far-flung money-printing authorities in Mauritius and Kuwait. But the decline of cash in recent decades, and the loss of a contract for printing British passports in 2018, have caused financial pain and plenty of profit warnings.
In 2022 the company had a public fight with its auditor EY over a warning in its accounts that the company may struggle to survive as a going concern. Then in 2023 the group requested to defer payments intended for its pension scheme and activist shareholder Crystal Amber Fund called for a new chair and business plan. The shares then traded at a fraction of their current value.
Enter Clive Whiley in 2023. Since his appointment to lead the board, De Le Rue's shares have increased nearly fourfold thanks to a focus on cutting costs. The group is also in the process of selling its authentication business, which helps governments detect fraud, to U.S. industrial technology company Crane NXT (CXT.N), opens new tab.
Buyout group Atlas is effectively taking over the remaining banknote business, the last vestige of a once-sprawling empire. The rise of digital money might, in one sense, make that seem like a dicey bet. In 2023, opens new tab in the United Kingdom, opens new tab, for example, only one in five transactions were made in cash, according to the British Retail Consortium.
Yet Atlas may have its eye on the classic private-equity playbook of boosting cash flows by taking an even greater axe to costs. There appears to be some scope to boost profitability. Ten years ago, the business operated with an EBITDA margin of nearly 20%, which has since declined to under 13%.
And the authentication-division sale will bring in 300 million pounds next month, which implies net cash for De La Rue of about 100 million pounds, according to a person familiar with the business, giving Atlas plenty to play with. For a centuries-old company, there seems to be a surprisingly large amount of value left to extract.
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U.S. private equity firm Atlas on April 15 said it had agreed to buy British banknote printer De La Rue for 263 million pounds.
The 130 pence per share all-cash deal implies a 16% offer premium to De La Rue's closing price on April 14.
Shares in De La Rue were up almost 16% to 129.54 pence as of 1053 GMT on April 15.
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