De La Rue in war of words with French suitor Oberthur

By SIMON DUKE FOR MAILONLINE
Updated: 19:10 EST, 4 January 2011

The war of words between De La Rue and its French suitor has intensified amid accusations that the UK banknote printer has kept secret the full extent of its soured relationship with its largest customer.

In a dramatic intervention, French rival Oberthur claimed that De La Rue had ‘crucial questions’ to answer after a sizeable new contract with the Reserve Bank of India was shared out among four of its competitors.

According to Oberthur, De La Rue’s patchy disclosure into the production woes that have rocked the company recently have prevented investors from judging its ‘prospects of obtaining new business from this very important customer’.

Production problems: At the time, De La Rue admitted that the print quality issues had cast a cloud over its dealings with its largest customer ¿ believed to India¿s central bank

The spiky statement is a marked escalation in the growing hostilities between the 20-year-old British firm and Oberthur, which had a £900million takeover proposal rejected by De La Rue in November.

The accusation relates to the production problems that came to light at its Hampshire paper mill in the summer, which have cost the firm £35million so far and triggered the departure of chief executive James Hussey. 

At the time, De La Rue admitted that the print quality issues had cast a cloud over its dealings with its largest customer – believed to India’s central bank.

City sources last night told the Mail that De la Rue had not even been invited to participate in the India’s recent tender to manufacture 16,000 tons of currency paper as the two sides were still working to resolve their differences.

Oberthur president Jean-Pierre Savare said: ‘De La Rue should inform the market if it was an unsuccessful participant in such key tender for the Reserve Bank of India or if it was not even invited to participate in that tender.’

De La Rue declined to meet the accusations head on, but confirmed that it was ‘in an on-going dialogue with the customer concerned.’ It admitted that ‘uncertainty remained as to the ultimate outcome of this issue and its impact on the group’.

Since the production problems came to light, shares in De La Rue (up 18p to 837.5p) have plummeted by more than a third. Oberthur said its 905-pence-a-share indicative offer remained on the table and that a deal would help restore the firm’s ‘damaged’ reputation.

It attempted to curry favour with employees and the British authorities by promising that production of UK banknotes would remain in Britain if a takeover goes ahead.