Strategic Analysis and Valuation of De La Rue

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De La Rue Plc dates its origination way back to 1821 when its founder Thomas de la Rue started it as a stationer and printer on a small scale in the UK. Since then the company has diversified geographically and has spread its footprints across 24 countries today employing approximately 4000 people all over the world. De La Rue is rated as the world’s largest commercial security printer and papermaker, which is involved in producing over one hundred and fifty national currencies along with a wide gamut of security documents like fiscal stamps, passports, authentication labels to name a few.

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Besides this, it is also the leading provider of equipment to sort cash and is also a reputed software solution provider to central banks worldwide that helps to minimize the total cost of handling cash. It has also ventured into new innovations and technologies in passport issuing schemes, driver’s license and national identification schemes. De La Rue is a member of the FTSE 250 and its ordinary shares have been listed with the UK Listing Authority and are trading on the market on the London Stock Exchange under the symbol DLAR. Its current market capitalization stands at $811.57 million.

2. Strategic Implications of the Takeover Deal

Recently De La Rue has been witnessing a series of production problems along with the resignation of its chief executive James Hussey which has taken a toll on its profits to the tune of GBP 35 million. This crisis-hit company has been the subject of takeover in recent times because of its leading position in several growth markets that have high barriers to entry. Its lucrative business potential coupled with its well established business globally makes it a good take-over candidate. Oberthur, a French company, has expressed interest to take over the company in an all cash offer which it has valued at GBP 896 million by offering 905 pence per share.

3. Analysis of the Recent Financial Performance of De La Rue Plc

3.1 Summarizing Ratios

Takeover deals can be broadly categorized under two heads (Jostarndt, 2007): Financial, and Strategic. While the intent of financial deals is to turn around the loss-making businesses in a profitable manner and command premiums on the time of exit, strategic buyers aim to integrate the businesses with its existing operations to reap the benefits of economies of scale and scope. In the absence of the relevant details, it has been assumed that the buyers have a strategic outlook for the deal and accordingly the analysis has been carried out. Strategic buyers are more concerned about the operating strengths of the business rather than focusing on financial measures of profitability like return on equity, dividend payout ratio which are of primary concern to the retail investor.

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