The Bank of England's bank note printer De La Rue has sold off its struggling cash-processing business.
The sale of Cash Processing Solutions (CPS) to private equity group Privet Capital is the latest move in De La Rue's plans to overhaul and streamline its operations.
De La Rue last year embarked on a five year strategic turnaround that will see the business grow its identity side of the business, which includes passports and ID cards and currently makes up just 15 per cent of revenue.
Read more: Cash isn’t dead and it isn’t even dying
Cash usage in developed economies has fallen sharply in recent years as businesses and customers increasingly switch to digital payments, though it is still growing in emerging markets.
Chief executive Martin Sutherland told City A.M.: “Identification is where there’s growth and we can win market share with new security features.”
De La Rue plans to use the biometric facial recognition technology from its passports to make ID cards.
Tomorrow De La Rue will post its full-year results, and analysts have pencilled in a fall in pre-tax profit from £57.7m last time round to £49.7m while revenue is expected to remain flat at £484m.
Privet Capital will pay £2.1m upon completion of the transaction and then a further £1.5m over the course of two years.
De La Rue could be in line for a further £6.5m if CPS hits targets meaning the deal could eventually be worth £10.1m.
The printer's share price has climbed by almost five per cent on the news and has recovered from lows recorded in mid-February.
The cash counting and verification business generated sales of £49.3m and an operating profit of £0.4m over the last year.
In the year ended 26 March, CPS is expected to generate sales of around £34m and an operating loss of £8m. The gross assets of CPS were £32.8m at 26 September 2015.
Following a root and branch review, we have concluded that whilst CPS has a good product profile and long term customer relationships, we do not believe that this is a business which should form part of our portfolio.
The sale will enable De La Rue to focus on its core business and future growth areas, as well as allow CPS to achieve its full potential under the new ownership.
We have entered into a strategic partnership with CPS, which will ensure that both De La Rue's customers and CPS's customers continue to benefit from each company's expertise over the long term.
De La Rue said that it expects to take a £23.4m non-cash exceptional charge in its full-year results relating to the sale.