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1 Feb 2018

De La Rue sells 90% stake to Epiris

De La Rue secures strategic relationship for its paper business

01 Feb 2018

Significant milestone in delivering our strategy to transform De La Rue into a less capital intensive, technology-led product and service provider
Strengthens De La Rue’s balance sheet and enables further investment in innovative technology solutions for the currency, identity and brand protection markets
Secures long term paper supply for De La Rue’s print requirements with a ten year supply contract
Limits De La Rue’s exposure to the external paper market

De La Rue plc (“De La Rue” or the “Group”), the world’s leading security and anti-counterfeiting provider for banknotes and personal identity, today announces that it has entered into a strategic agreement with Epiris Fund II (“Epiris”) for the Group’s paper business, comprising the Overton paper mill and the Bathford paper mill, and to be named Portals De La Rue Limited (“Portals De La Rue”).

Under the terms of the agreement, Epiris, together with management, will acquire a 90% shareholding in Portals De La Rue through a newly formed company WhickerCo Limited, for a cash consideration of c£61m payable upon completion. This equates to an enterprise value of £68m and a multiple of 12.8x average adjusted EBIT 2015-18. De La Rue will retain the remaining 10% interest.

De La Rue’s paper business has a capacity of c13,000 tonnes per year which is split approximately equally between internal use and external sales. As part of the transaction, Portals De La Rue will commit to supply pre-agreed volumes of paper to De La Rue with a pre-agreed price mechanism for the next ten years. This will meet most of the Group’s anticipated internal requirements for finished banknotes and security documents. In addition, De La Rue will be Portals De La Rue’s preferred supplier for security features. Following completion, the existing management team of De La Rue’s paper business will remain with Portals De La Rue.

This transaction will limit De La Rue’s exposure to the external paper market, while securing paper supplies and maintaining the Group’s position as the world’s leading integrated banknote supplier. It will also enable the Group to strengthen its balance sheet and to focus on providing innovative technology solutions for the currency, identity and brand protection markets.

In the financial year to March 2018, De La Rue’s paper business is expected to generate sales of c£120m, of which c£50m is intra-group transactions, and an EBIT of c£10m. Following the transaction, De La Rueexpects to reduce its ongoing overhead costs by c£4m by FY2019/20.

De La Rue expects to incur approximately c£4m exceptional cost in relation to the transaction in FY 2017/18. In addition, the Group expects to take a non cash provision of £4m for the possibility that certain prescribed conditions may not be met. The transaction is expected to complete within the first half of this calendar year.

Commenting on the transaction, Chief Executive Officer of De La Rue Martin Sutherland said:

“We are pleased to have found the right partner for our paper business. It is another significant milestone as we transform De La Rue into a less capital intensive, technology-led product and service provider.

“This transaction strengthens our balance sheet and enables us to invest further in technology and the strategic growth areas of Security Features, Polymer, Identity Solutions and Product Authentication.

“De La Rue has been supplying banknotes for central and commercial banks around the world for over 200 years, and will continue to do so supported by Portals De La Rue. As the world’s largest commercial banknote supplier, we remain committed to providing the best integrated currency solutions to our customers. Meanwhile, we are also diversifying our business by strengthening our offerings for the identity and brand protection markets.

“In Epiris, we have found a strong partner with extensive experience in the banknote substrate market that will have a singular focus on growing the paper business for the long term. This is good for De La Rue and its customers, as well as for Portals De La Rue, its customers and employees.”

An analyst call will be held at 8:30am GMT on 1 February 2018. Dial-in for the conference call is 0844 800 3850, passcode: 370 700. An archive of the call is available for a week from 2 February 2018. Dial-in for the archive call is 0800 032 9687, passcode: 7603 9129. The call can be accessible via an audio webcast on our website www.delarue.com.

De La Rue plc’s LEI code is 213800DH741LZWIJXP78.

The person responsible for the release of this announcement on behalf of De La Rue plc is Ed Peppiatt (General Counsel and Company Secretary)

Enquiries:

De La Rue plc +44 (0)1256 605000

Martin Sutherland - Chief Executive Officer

Jitesh Sodha Chief - Financial Officer

Lili Huang - Head of Investor Relations

Brunswick +44 (0)207 404 5959

Katharine Spence

Stuart Donnelly

http://www.delarue.com/media-center/de-la-rue-secures-strategic-relationship-for-its-paper-business