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Innovia buys Australian plastic banknote firm

By Kate Tilley, Plastics News
Posted 26 February 2013

Australia's central bank will complete the sale of its stake in Securency International, the country's plastic banknote maker, by 28 February. The Sydney-based Reserve Bank of Australia has agreed to sell its 50% stake in Securency to its business partner and fellow shareholder Innovia Films, a polymer film manufacturer based in Wigton, the UK.

In a statement, the Reserve Bank said it will receive an initial payment of AUS 65m (£43.8m)

According to the bank's 2011-12 financial accounts, covering 1 July 2011 to 30 June 2012, Securency's investment was valued at AUD 54m (£36.4m).

"Additional payments may be made to the bank over following years, including if Securency exceeds certain earnings benchmarks," the statement said.

The Reserve Bank and Innovia initially announced they jointly wanted to sell Melbourne-based Securency in late 2010. Innovia later decided it no longer wanted to sell its 50% stake and made an offer to buy the bank's shares.

The Reserve Bank said its "long-standing" intention was always to exit from the JV once Securency had established itself as a viable, long-term supplier of the polymer-based banknote substrate.

In a statement, Innovia Films said the company's existing cash reserves will fund the acquisition, which is expected to be completed 28 February.

Innovia Films CEO David Beeby said: "It has always been [the Reserve Bank's] clearly stated policy to grow the business to the point where it would be divested once it held a strong position in the market, and that time has certainly arrived."

Securency was established in 1996 to manufacture and market a biaxially oriented PP polymer substrate used in Australian banknotes since 1988.

Currently, 21 countries use the substrate for their banknote supply, but overall 34 countries have used it.

The Reserve Bank wholly owns Melbourne-based Note Printing Australia, which operates the printing works where Australia's banknotes are printed. The bank plans to retain Note Printing.

"As part of the sale, Note Printing will enter into a long-term supply contact with Securency for the provision of polymer substrate for Australia's next generation of bank notes," it said.

Securency and Note Printing have been embroiled in a bribery saga since May 2009, when a whistleblower claimed bribes totalling up to AUD 45m (£30.4m) were paid by Securency's foreign agents to sell the polymer bank­note technology globally.

In 2011, the Canberra-based Australian Federal Police (AFP) charged Securency and Note Printing, and eight of their senior executives, with bribing foreign public officials.

The AFP alleges they conspired with sales agents in Indonesia, Malaysia and Vietnam to bribe officials to secure contracts to produce polymer banknotes for those countries.

Committal proceedings in Melbourne Magistrates' Court began 13 August but then were adjourned to 3 April.

A Securency spokes­man would not comment on the committal (a preliminary hearing after which a magistrate determines whether there is sufficient evidence for the accused to be tried in a higher court). The spokesman said Securency was subject to a court-ordered suppression order.

In August, David John Ellery, Securency's former chief financial officer and company secretary, pleaded guilty in Victorian Supreme Court to falsifying documents in 2006. He was sentenced to six months in jail, suspended for two years.

Prosecutors did not argue Ellery was part of an "inner sanctum" of an alleged bribery conspiracy. But Ellery agreed to give "full and frank evidence" against his co-defendants as part of his guilty plea.

The Reserve Bank commissioned an independent review into its oversight of Note Printing and Securency, which was released 12 February. The review, conducted by Melbourne-based governance specialist Cameron Ralph, concluded the bank implemented appropriate processes.

"Clearly, with the benefit of hindsight, there could have been more oversight applied to the activities of [Securency and Note Printing], which may have detected earlier the alleged illegal payments.

"But that does not mean the bank's oversight at the time was inappropriate," the review said.


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