-Caveat Lector-
http://www.delarue.com/news/articles/210.asp
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News Article
DE LA RUE PLC
News Release 29 May 2002
DE LA RUE ACQUIRES NORTH AMERICAN ELECTION SYSTEMS BUSINESS
De La Rue, the cash to secure transactions Group, has today announced the
acquisition of 85% of the share capital of Sequoia Voting Systems Inc.
("Sequoia") one of the largest providers of voting equipment, software,
ballot printing and election services in the USA. De La Rue has acquired the
business from Jefferson Smurfit Group plc, the international paper and
packaging company who, under the terms of the agreement, will retain 15% of
share capital in the business for a minimum of three years. The consideration
is US$ 23m, (£15.8m) with a further payment of up to US$12m (£8.3m) dependant
on certain performance criteria being met, linked to agreed sales growth. As
at 31 December 2001, Sequoia had estimated net shareholders' funds of $4.2m
and the transaction will be debt free and earnings neutral in the current
year.
Sequoia offers hardware products in all major segments of the North American
elections market, including direct recording equipment and optical scan
systems. The company also supports its hardware with proprietary software
systems enabling municipalities to fully computerise their voter
registration, ballot creation and election tabulation processes. With over
25,000 touch screen and electronic voting machines in use across the USA,
Sequoia is a leading supplier of electronic voting machines in the country.
The company also operates a printing business to support customer needs for
paper ballots (punch cards and optical scan) and information booklets. Based
in Oakland, CA Sequoia currently employs 140 staff with a strong customer
base in the West Coast and North East of the USA.
De La Rue is acquiring the business as part of its strategy to invest in new
business opportunities and also to build on its position as a leading
provider of secure, government identity solutions. De La Rue sees the
election systems market as having strong potential for growth with Sequoia
well positioned to take advantage as the market in the USA moves to
increasingly automated voting solutions. In the short term, expectations are
high that some US$3-US$5bn of Federal funding for electoral reforms will
accelerate the evolution of the market to adopting highly secure automated
election systems. In addition, in the medium term De La Rue sees
opportunities for future revenues through servicing and upgrading of the
installed base of hardware and software and the provision of technical and
consultative services. De La Rue also sees potential for international
expansion of the business through leveraging De La Rue's strong relationships
with the world's governments.
Based on the unaudited management accounts for the 12 months ended 31
December 2001 the business had a turnover of US$27.5m (£18.9m) and recorded
an operating loss of US$10m (£6.9m). However 2001 was not a typical year due
to the market awaiting the outcome of Federal electoral reform funding
initiatives. In 2000 the business made a profit of US$6m on sales of US$45m
and will also be profitable in the current year based on management
projections. During 2001, the business also invested in developing its
product range ahead of the anticipated increase in demand and has
subsequently won a number of contracts in the current year incorporating its
touch screen voting technology.
The business will continue to report to current Sequoia President, Peter
Cosgrove who will report directly to De La Rue Chief Executive, Ian Much.
This is in order to take full advantage of the immediate growth opportunities
in the North American market and to explore the opportunities for further
longer term growth in services in the USA and international expansion. For
financial reporting purposes the business will report within the Global
Services division. It will continue to use the Sequoia brand in the USA
market where it has an excellent reputation.
Commenting on the acquisition, Chief Executive, Ian Much said:
"The acquisition of Sequoia Voting Systems adds a new strategic dimension to
De La Rue's range of secure transaction solutions and complements our
existing core competencies in providing worldwide government identity
solutions. Sequoia is a major player in the US election systems industry with
an excellent range of voting solutions with considerable knowledge and
expertise of the North American market. Coupled with De La Rue's solid
financial strength, strong international government relationships and
geographical reach, this acquisition allows us to immediately capitalise on
this growing market in the USA. Looking to the medium term it will also allow
us to expand the business internationally in the future using our combined
strengths."
-ends-
For further information please contact:
Paul Hollingworth, Finance Director +44 (0)1256 605307
Mark Fearon, Head of Corporate Affairs +44 (0)1256 605303
Stephen Breslin, Brunswick +44 (0)207 404 5959
29 May 2002
Editors notes
1. 2001 was a non-representative year in the election systems industry
following difficulties experienced in processing the November 2000
Presidential election result in Florida. Most counties and states put their
election procurement programmes on hold awaiting various voting reform
initiatives and state funding to upgrade voting systems to electronic systems
which are now being unveiled by the Federal government. Furthermore Sequoia
invested in new equipment both in 2001 and the current financial year over
and above normal R&D expenditure.
2. De La Rue is the world's largest commercial security printer and
papermaker, involved in the production of over 150 national currencies and a
wide range of security documents such as travellers cheques and vouchers.
Employing over 7,000 people in 31 countries, the company is also a leading
provider of cash handling equipment and software solutions to banks and
retailers worldwide, helping them to reduce the cost of handling cash.
Applying our core brand values of security, integrity and trust, De La Rue is
at the centre of some of the most innovative and exciting developments in the
secure products and services market. We are pioneering new technologies from
tailored solutions to protect the world's brands through to government
identity solutions in secure passports and identity cards.
3. An interview with CEO Ian Much can be viewed at the De La Rue
[www.delarue.com] and Cantos websites [www.cantos.com]
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