Ahead of its figures next Tuesday banknote printer De La Rue is in demand.
Bucking the falling markets, its shares have added 6.5p to 891p. Surely it can't be the hope that the company will benefit if the eurozone breaks up and various countries have to start printing drachma or lira and so on?
Even if De La Rue was to do so, it would not reveal it under confidentiality terms. Look how it was coy about confirming the client involved in a production problem which lead to the loss of the contract (analysts said it was the Bank of India.)
However analysts at UBS have pointed out that failed French bidder Oberthur will be free to return to the fray from December 1, and reckoned it could offer up to £12 a share. UBS analyst Alex Hugh said:
We expect Oberthur will still be interested in De La Rue, but they will have to pay up. Whilst Oberthur has not completed the divestment of its Card Systems business, a sale has been agreed subject to competition reviews. With around €1bn from the sale, Oberthur looks a much more serious bidder this time around than it did at the end of last year when leverage on the deal would have been way too high.
De La Rue is better able to argue it has not seen any impact from the India contract loss even though there is no formal resolution on this issue. However, we have looked again at synergies, and they would be quite material assuming Oberthur moved all its bankpaper volumes to De La Rue. We estimate synergies at £46m, and we would expect De La Rue to want to be paid for them. We think close to £12 a share is a possible take-out price which the board would struggle to reject.
If no bid, we think shares are worth around 730p. With a bid, around £12. Using 50% probability of both = 950p price target. Risk reward on a bid looks balanced so we stay neutral.
