De La Rue (DLAR) announced it has rejected an increased bid of 935 pence per share from Oberthur, as it believes this offer still undervalues the company. As a result, Oberthur has dropped its bid to acquire De La Rue. This latest bid was a bit higher than our fair value estimate for the firm, but given that De La Rue's stock had traded at higher levels before the company's production issues last year, we can understand management's reticence to sell at this price.
We are maintaining our fair value estimate, which is based on our assessment of the firm as a stand-alone company. With the shares falling significantly after this latest announcement, we believe they are undervalued at the current level and could represent an attractive entry point for investors willing to ride out the near-term uncertainty. But given the potential for substantial customer losses, we would like to see a larger margin of safety before recommending De La Rue's shares.
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