Bottom Line: Worth the paper

SECURITY printing is not as secure as it once was. In the age of the colour photocopier and the computer scanner, watermarks and metal strips are proving a better way of beating the modern counterfeiter than complicated printing techniques.

This has dawned on De La Rue in recent months and prompted the world's largest banknote printer to consider a pounds 600m bid for Portals, a manufacturer of paper for banknotes and teabags.

De La Rue says it will be able to deliver a better service if it can control the whole process of paper making to printing. And it will also be able to sell the paper to the 90 per cent of the world's banknotes that are printed by state- owned printing plants.

A pounds 600m acquisition would require a pounds 475m goodwill write-off, wipe out De La Rue's pounds 200m-plus of cash reserves and give the larger company significant borrowings. De La Rue would have to secure good prices for the bits of Portals it does not want if it is to avoid earnings dilution. The most worrying thing for De La Rue shareholders is that the printer seems to be coming at Portals from a position of weakness.