De La Rue’s shares, the embattled printer of banknotes, soared after it reached a deal conditional to sell its division of authentication for £300million. The proceeds from the sale will be used to reduce group debts and fund the deficit-plagued pension scheme of the company.
De La Rue revealed that an earlier version had raised concerns for The Pensions Regulator, and needed to be revised. Crane NXT is the New York listed industrial technology company that will purchase this division. It supplies security devices, such as holograms, to authenticate documents and goods.
De La Rue is now a pure printer of banknotes. The company can now choose to sell the banknote division or seek a bid on the entire group.
De La Rue was founded in Basingstoke more than 200 year ago. The company was once a blue-chip, FTSE 100 member but has fallen on hard times and is now valued at just under £200 million. The setbacks range from losing out on the contract to print British Passports, to corruption allegations and problems with quality.
The company was forced last year to suspend payments for its defined benefit pension plan and hired Clive Whiley as chairman in order to implement radical reform.
The company still produces notes for the Bank of England, the Scottish banks, and has recently started producing notes with the face of King Charles on them. Whiley called the agreement “a significant step forward”. The deal would enable the company to pay off its revolving loan facility ahead of the maturity date on July 1, 2025.
Richard Bernstein, of Crystal Amber, an activist investment group, who holds a stake in the company greater than 15%, praised the deal as “a great value”. Bernstein was an activist for change in De La Rue, and he played a key role in the ouster of Kevin Loosemore as chairman last year.
De La Rue would have been in administration by 30 June 2023 if we had not changed the chairman of De La Rue 18 months earlier. Clive Whiley delivered, he said
De La Rue announced that it would transfer £30 million from the sale proceeds to the pension scheme upon completion of the deal and another £12.5 millions in the period until April 2027. The long-term solution would be to sell the assets and liabilities of the pension scheme to an insurance company through a “buyout”.
De La Rue owes pensions to 6,500 former and current employees worth £696million. The shortfall was estimated at £78million at the last actuarial evaluation in September 2023.
Clive Vacher said that the regulator intervened earlier in the deal, asking for the scheme members to receive a more equitable treatment against the banks.
De La Rue can still pay back its revolving loan facility to the full amount by July 2025. Vacher stated that the goal was to eliminate the pension deficit within three years rather than six years as previously anticipated.
The shares rose by 13 1/2p or 14.4% to close at 1071/2p. The shares were as low as 30p in June last year amid fears that the company would fail.
Vacher explained that the deal was structured in a way to be tax-efficient, as it is a “put and calling option agreement”. It’s conditional upon clearance by the competition authorities, and the complete separation of De La Rue from this division. The division reported revenue of £102.9 millions in the year ending 30 March 2024. This represents a 16.9% increase, and operating profits of £14.6million, a 33% increase.
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