Geyres steps down at Oberthur – but what’s the truth behind his departure?

The news that Philippe Geyres was stepping down from his role as managing director was another twist in an eventful year for Oberthur Technologies. Amid rumours of mergers, strategic re-shuffles and potential acquisitions, the French card giants were hit by Geyres’ decision to end his two year tenure at the helm, with Thomas Savare taking over. The official line from Oberthurs suggested Geyres had ‘completed his duties’. A company statement said, “Philippe has greatly contributed to the strengthening of the Card Systems Division, we are sorry to see him leave.” But was the split as amicable as Oberthur Technologies would have us believe, or was Geyres left with no option but to leave an increasingly unsteady ship?

Throughout 2008, the company undertook a major restructuring process, splitting operations into three separate divisions – card systems, ficudiary, and cash protection. In July the group created an additional new division centralizing all its activities in the identity field that previously had been part of the card and fiduciary divisions. It’s likely the decision to reorganize was a result of companies within the industry having to adapt their strategies to cater for the continuous advances in smart card technology. Some, like Oberthur Technologies, have opted to form separate divisions to address the needs of the new markets, whereas others have chosen to partner with other players.

There were rumblings that Oberthur Technologies were interested in acquiring card activities from Sagem Orga, the world’s fifth largest vendor. This isn’t the first time the two companies have been linked to a possible merger. Since Axalto and Gemplus joined forces in 2005 to form Gemalto, the remainder of the chasing pack were left sweating on their futures. Gemalto commanded 50% of the market share and represented sales of 2 billion euros, in stark contrast Oberthur had sales of just 500 million euros. Unsurprisingly, Oberthur objected to the merger arguing that the creation of a rival four times its size was unsustainable for the industry. While the group have been vague about their plans to respond to any partnership with Sagem Orga since then, it seemed inevitable that local acquisitions of second tier vendors would have to take place. Of course, if this didn’t happen Oberthur wouldn’t have the purchasing power to compete with Gemalto.

Lo and behold, already this year the company has completed the acquisition of XponCard group for a cool 70.4 million euros. The deal meant that Oberthur becomes the owner of more than 85% of total shares. This has already proved fairly fruitful – third quarter financial results showed XponCard-related activities had attained sales of 14.8 million euros, up 13.8% on the previous quarter. The group is also reportedly interested in purchasing the paper division of Arjowiggins, a world leader in banknotes and security papers. The move would make strategic sense, allowing the group to vertically integrate upsteam and compete with its rivals in this sector, Louisenthal and De la Rue. However, there is still some uncertainty as to whether Oberthur could finance such a move. The acquisition of the entity would create a level of debt nearly four times the gross operating surplus. Bad news for Oberthur, but great news for Arjowiggins.

So much activity could have unsettled Geyres, and maybe decisions were made without his full support. But perhaps the straw that broke the camel’s back was the recent decision by Oberthur to delist the company shares from Euronext Paris, and run all operations privately. Parent company, François Charles Oberthur Fiduciaire (FCOF) made the offer to Oberthur shareholders to buy back their shares, thus commanding 95% of the group’s share capital and voting rights. FCOF is to spend up to 226 million euros buying out minority shareholders, offering 6.70 euros per share – a premium of 33% over the last traded price of the euro (5.01). Despite this, some shareholders complained the offer was too low and threatened not to propose their shares in the deal. Before the deal, the Savare family (who own parent company FCOF) already commanded 72% of Oberthurs capital and 77% of the voting rights.

According to Oberthur, delisting the company from the French stock exchange will ‘facilitate long-term strategic and industrial investments necessary to its future development.’ One of the objectives of such a move is to give more flexibility to Oberthur management. That’s certainly proved the case already, with a host of chopping and changing in senior management, most notably the departure of Geyres. The group also suggested delisting will ‘shelter the company from market pressure’. In other words – the decision to go private may have had something to do with possible forecasts of deterioration not just in market conditions, but in the group’s profit margins. I’m only speculating – but perhaps Geyres knew something we didn’t ? Watch this space.



(Smartcard News Ltd, 2008)