***September/October ~ Proposal to Form an "Arab Union" Much Like the European Union ...
Sunday, 6 March 2011
Mid East turmoil is good news for money printers
Not since the collapse of the Soviet Union has there been a better time to be in the job of printing money.
Only a handful of companies are involved in this industry, with the UK's De La Rue, Germany's Giesecke & Devrient and France's Oberthur Technologies perhaps the most famous.
And they must be salivating over events in North Africa and the Middle East. With regime change comes big seven-to-eight figure commissions for these guys.
As soon as a dictator is forced out or gets bumped off, his replacement is desperate to get the old despot's mug off the notes to create a new national identity. This has to be done swiftly to ensure economic stability, in effect ruling out the job going to a state printing press that simply won't be up-and-running so quickly after a revolution.
For example, De La Rue flew over 100 tons of Iraq's new notes in Boeing 747s within a month of Saddam Hussein's defeat in 2003. Between 1991 and 1995, inflation in Iraq stood at 250 per cent, so even without Saddam's image the currency was unacceptable because the number of notes in circulation was out-of-control and their value meaningless.
A trawl through The Independent on Sunday's archives shows that, in 1994, De La Rue reported a 20 per cent rise in pre-tax profit to £123.7m largely "because of the company's trade with the rapidly growing emerging economies". The then chief executive, Jeremy Marshall, pointed out that it was doing great business with the newly emerging former Soviet states.
De La Rue ended up creating currencies for Turkmenistan, Azerbaijan and Kyrgyzstan, while Giesecke & Devrient won contracts with the Baltic trio of Estonia, Latvia and Lithuania.
New notes in Egypt and Tunisia seem inevitable, while Libya will not be far behind (De La Rue recently printed £900m-worth of dinar for the existing regime, which was impounded by the Government last week). As the world's leading currency maker with more than 150 countries on its books, De La Rue is almost certainly worth a punt for investors.
The company's stock is in a historically poor place at 740.5p as of the close of business on Friday. Last June it was 984p, but sank after the company admitted staff had faked quality control tests in India, leading to the resignation of its chief executive, James Hussey. This was a huge hit for the company as De La Rue's contract with India's central bank in some years made up a quarter of its profits. The Serious Fraud Office even got involved, wrecking what remained of investor confidence.
Unsurprisingly, De La Rue became a takeover target and Oberthur waded in with an 825p-a-share bid which later rose to 935p. With these new opportunities, it's clear that De La Rue did the right thing in rejecting what is now an obviously opportunistic offer.
Give it 12 months and I suspect that De La Rue will have made a string of significant announcements on chunky new contracts in what is, after all, an incredibly consolidated market.
It should rebrand itself as the stock for democracy: the more dictators lose their jobs, the better the shares should perform.
http://www.independent.co.uk/news/business/comment/mark-leftly-mid-east-turmoil-is-good-news-for-mon...
