In a separate agreement, Portals is also acquiring a ‘put-and-call’ option to purchase certain banknote paper paper assets (including machinery) from the Fabriano division of Fedrigoni, which makes banknote and other security papers.
The completion of these two separate transactions could occur during the course of 2021, subject to customary approvals. The price has not been disclosed.
According to Portals, this strategic move shows confidence in the currency and high security sectors.
There has been speculation in recent years about the future of banknote papermaking in general due to long-term overcapacity, declining demand in some parts of the world, and more notes switching to polymer.
There has also been considerable speculation about the future of Fedrigoni’s security business. The banknote papermaker first entered the thread and features market in 2004 with the acquisition of Mantegazza, the Italian security printer, thread and hologram producer. Fedrigoni bought the SALTO paper mill in Brazil from Arjowiggins in 2015, but this was sold last year by its owner, Bain Capital, which acquired Fedrigoni in 2017.
Separately and not related to the threads and foils business that Portals is acquiring, Fedrigoni also announced last year that it had struggled to fill capacity at the Ancona paper mill in Italy and that it was in discussions about the options for the future of the security division, sales and profits for which were a third lower in 2020 than in the previous year due to the effects of COVID.
An additional, and unhelpful, factor in the company’s prospects was the launch of Valoridicarta, a joint venture between the Bank of Italy and Istituto Poligrafico e Zecca dello Stato (IPZS), Italy’s state-owned mint and printer, to produce paper banknotes and identity documents, in 2019.
But these market stresses aside, the company has a strong security portfolio. Not only is it a key supplier of magnetic threads for the euro, but offers a range of other thread technologies too, along with diffractive and other foil-based security features for banknotes as well as passports.
Hence the logic of this move by Portals, which – since its acquisition by Epiris from De La Rue in 2018 – has invested over £20 million to develop its banknote and security paper business. It does not, however, have its own thread or foil portfolios (a strong IP offering is seen as increasingly important to maintain and grow business in the competitive security paper market, but both these portfolios remained with De La Rue following the sale).
The business continues to supply paper to De La Rue, with whom it has a 10-year supply agreement, but from whom orders dropped substantially last year (albeit, with a growing customer base says Portals, this appears not to be an issue for the invigorated business).
From both perspectives, therefore, this looks like a match made in heaven. The future of the security threads and foils part of Fedrigoni, whose roots date back to the 13th century, is secured. It will also provide the relative newcomer Portals (with just 300 years of history to its name) with an expanded portfolio and a more holistic and hence competitive product offering.
‘We look forward to the completion of the transactions and to welcoming Fedrigoni’s skilled and experienced Bollate team to Portals as we continue to develop a leading, integrated security paper business. This transaction will enable Portals to develop and deliver more quickly and efficiently the leading security products our customers require’, said Portals CEO, Dr Ross Holliday.
‘We are proud that an established international player in the banknote and security papers business, who intends to invest and expand, has expressed strong interest to acquire our security business based on the value of our technology and the know-how of our people, who we are placing in excellent hands,’ added Marco Nespolo, CEO of Fedrigoni Group.
Around 100 employees from the group, including commercial and support staff, will join the new company, Fase SrL, which has been established to allow the transaction regarding the Bollate-based security business. Production of its threads and foils will continue to take place in Italy.
Following the acquisition, Portals states that it will be able to provide its clients with an improved and integrated proposition offer of both paper as well as security threads and foils, and will significantly accelerate investment in an integrated innovation strategy.