French state to own a quarter of contractor

THE foreign firm that has won the contract to make British passports is being bought by a defence company quarter-owned by the French state.

Gemalto, which has been hit by a string of profit warnings, sells £ .1billion worth of driver’s licences, e-passports and electronic banking software around the world every year.

The company was founded in 005 in a merger of digital security firms Gemplus, based in Luxembourg, and Axalto, based in Holland. French public investment arm Caisse de Depots has an 8 per cent stake.

Gemalto currently has stock market listings in Paris and Amsterdam. While it has a headquarters in the Netherlands, the management and a large part of the staff are French.

Now it is being bought by defence giant Thales, which is 6 per cent owned by the French state.

The move follows a series of profit warnings which hammered its share price late last year. Slowing demand for mobile phones has hit Gemalto’s business and it has been trying to get deeper into the lucrative market making passports, having secured key production facilities in Switzerland when it bought rival Trub in 015. Gemalto now helps makes electronic passports for more than 30 countries, including France, Algeria, East Timor, Lebanon, Denmark, Finland and Latvia. Led by French boss Phillip Vallee, 53, it says its products are used in some 00 government programmes worldwide.

It already works with the UK government to produce driving licences, residence permit cards, and technology for the electronic gates at Heathrow and other border entry points.

Gemalto’s phone sim card market has been stagnating and in October

016 it issued its first of four profit warnings. Last year it announced plans to lay off 88 workers at its struggling chip card business in France, around 10 per cent of its staff in the country.

Its falling share price made it vulnerable to a takeover, and in December French rival Atos, the IT services group, tabled a £3.7billion bid. Gemalto refused, but days later accepted a £4.1billion offer from France’s Thales, one of the world’s largest defence contractors with sales of about £13billion.