Innovia deal for rest of Securency to close, bribery case to continue

By Kate Tilley
Correspondent

Published: February 22, 2013 2:54 pm ET
Updated: February 22, 2013 3:01 pm ET

Related to this story

Topics Mergers & Acquisitions

SYDNEY — Australia's central bank will complete the sale of its stake in Securency International Pty. Ltd., the country's plastic banknote maker, by Feb. 28.

The Sydney-based Reserve Bank of Australia has agreed to sell its 50 percent stake in Securency to its business partner and fellow shareholder Innovia Films Ltd., a polymer film manufacturer based in Wigton, England.

In a statement, the Reserve Bank said it will receive an initial payment of A$65 million (US$67 million).

According to the bank's 2011-12 financial accounts, covering July 1, 2011, to June 30, 2012, Securency's investment was valued at A$54 million.

"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 percent 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 joint venture 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 Feb. 28.

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 polypropylene 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 Ltd., 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 totaling up to A$45 million 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 Aug. 13 but then were adjourned to April 3.

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 Feb. 12. The review, conducted by Melbourne-based governance specialist Cameron Ralph Pty. Ltd., 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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Innovia deal for rest of Securency to close, bribery case to continue

By Kate Tilley
Correspondent

Published: February 22, 2013 2:54 pm ET
Updated: February 22, 2013 3:01 pm ET

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