Portals, De La Rue reach settlement over paper contract
- Published: Aug 13, 2022, 8 AM
Portals is a historic English paper making business that was founded in 1711, and which operated under various versions of that name for more than 300 years.
The company opened one of its paper mills, Overton Mills, in Hampshire in 1922. In 1995, Portals was acquired by bank note printer De La Rue, which ran it until 2018, when De La Rue divested itself of the security paper manufacturer and it once again began operating as an independent business under the Portals name.
As part of the 2018 divestiture agreement, De La Rue retained a 10% stake in a management buyout of the new company and secured a 10-year paper supply contract for De La Rue’s printing requirements, making it Portals' biggest customer. The agreement called for De La Rue to buy bank note, proofing and security paper from Portals, subject to a minimum annual volume guarantee, and Portals to purchase security features from De La Rue, with no guarantee of volume.
Recent years have seen De La Rue shift its emphasis to polymer rather than paper for its bank notes, even as it encountered a series of financial difficulties including losing the contract to print British passports. The printer now says the guaranteed volume is not obtainable, and things will only get worse over the duration of the contract. It announced a settlement agreement with Portals on July 26 that gets it out of the contract and puts 300 people at Overton Mills out of work.
De La Rue would have had to pay Portals about £364.2 million, or $440 million, over the remaining five years and eight months of the contract, a figure that includes the anticipated costs of paper manufacture and fixed charges. Without paper charges it would be £119 million. Instead it will pay £16.7 million in cash to terminate the contract, £1.7 million on or before Dec. 31, 2022, £7.5 million on or before Jan. 6, 2023, and £7.5 million on or before April 7, 2023.
Under the agreement, De La Rue will be free to purchase bank note and security paper from any supplier worldwide.
Portals said in a statement to the BBC, “Following the global pandemic and other recent world events we have seen a significant adverse impact on our banknote paper business.”
“It is also clear that the change in the strategy of our largest customer, De La Rue plc, and the rising input costs specifically of energy, all in the context of the highly price competitive banknote paper marketplace in which we operate, means that our banknote paper business at Overton is no longer viable.”
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