Passport maker targeted by the takeover sharks

Bosses at De La Rue warned by hedge fund to prepare for hostile raid

THE banknote printing firm which lost the contract to make British passports is preparing to defend against hostile takeover bids, the Mail understands.

De La Rue has been warned it is a sitting duck after the controversial decision by the Government to award the contract for the new blue British passport to French firm Gemalto.

Bosses have been warned by investors to put in place a strategy that protects the firm from predators.

De La Rue has long been viewed as a takeover target as its share price has lagged behind the value of the contracts it holds, and has already fended off approaches from foreign rivals.

Since the passport scandal, activist hedge fund Crystal Amber – which has built up a 3pc stake – has been agitating for change at the firm.

Directors bought shares worth almost £335,000 this month. This came in response to leading investors claiming bosses did not have enough ‘skin in the game’ to protect the British company from a predator looking for a bargain.

The Mail understands De La Rue has spoken to corporate finance bankers at Investec – a move typically associated with firms formulating a takeover defence.

It has also prepared a so-called ‘defence document’, a plan which vulnerable company boards usually put in place if they think the firm is under threat. A spokesman for De La Rue denied that the company had appointed a ‘specialist’ team of corporate finance advisers at Investec, which already acts as its broker.

But the firm conceded the defence document had been put in place as part of its ‘regular operational and strategic review’.

Analysts have speculated that any potential bid for De La Rue would likely come from abroad.

France’s Oberthur technologies mounted a bid for the banknote producer in 2010, which fell through at the beginning of 2011. It declined to comment on whether it would try again. However Russ Mould, investment director at broker AJ Bell, said that buyers could be deterred by an increasingly protectionist government line. ‘De La Rue is possibly one of those stocks that could be seen from a national security angle,’ he said. Government intervention was rumoured to be one reason why Oberthur backed off from its last takeover attempt. Richard Bernstein, of Crystal Amber, said: ‘De La Rue is a great British company with a strong heritage, but it’s made itself incredibly vulnerable to overseas predators.’ Following the passport contract loss to Gemalto, De La Rue issued two profit warnings and lost its finance director. The beleaguered company is now trading at just 545p, down 13.9pc since the beginning of the year, giving the entire firm a market value of £559m. Bernstein has said a new business set up with De La Rue’s current contracts and customer base would probably be valued at more than £900m.