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Investors in the maker of controversial animal fat £5 notes have received a multimillion pound windfall, tripling their money in two years after selling the company for £680m to Canadian firm CCL Industries
Innovia was embroiled in scandal after it emerged in November that it used tallow derived from animal carcasses as an ingredient in its banknotes.
Innovia attracted heavy criticism from animal rights campaigners, vegans, Sikhs and Hindus among others who condemned the Bank of England for allowing animal fat to be used.
Despite the controversy, the contract with the Bank of England has proved extremely lucrative for the company’s private equity investors who bought the company just two years ago.
Lead investor Smithfield Group made 3.6 times its initial investment while fellow private equity firm Electra Partners cashed in a windfall of £106m – or 3.2 times what it put in. The initial investment was announced weeks after the award of the Bank of England contract.
The new buyer, Canadian label and packaging maker CCL Industries, was not put off by the animal fat scandal. Geoffrey Martin, chief executive of CCL, said the deal would “propel the company to world leadership in the disruptive, fast growing polymer banknote market".
UK-based Innovia Group is a maker of polypropylene films used in labels and packaging, but the prime motivator of the deal was Innovia’s position as the dominant supplier of polymer banknotes, which are considered more secure than paper issues.
The methods by which the company obtained its near-monopoly position as the maker of plastic bank notes are highly controversial. The company’s banknote division, previously known as Securency, has been at the centre of one of the biggest bribery scandals in central bank history, uncovered by Australia's the Age newspaper.
Started as a joint venture between the Reserve Bank of Australia (RBA) and Innovia Films in 1996, its former employees have been found guilty of offering bungs to foreign officials to win contracts.
The sentencing judge slammed the culture of the company at the time: “You were acting within the culture which seems to have developed within Securency, whereby staff were discouraged from examining too closely the use of, and payment arrangements for, overseas agents,” the ruling said. “Secrecy, and a denial of responsibility for wrongdoing, also seem to have been part of the corporate culture at Securency at that time.”
Judge Elizabeth Hollingworth wrote in the ruling that when sentencing she had taken into account the fact that Ellery would be an important witness in charging other senior executives.
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Cases against former senior executives – none of whom are still at the company – were brought in July 2011 but remain ongoing.
After the Reserve Bank of Australia sold its half of the banknote making company to its partner, Innovia, in 2013, Innovia thanked the RBA for its help, which had enabled it to corner the polymer banknote market.
“The RBA proved an outstanding partner in helping Securency establish itself in the global banknote industry during a period in which some of the world’s most successful companies, including 3M and Mobil also attempted to enter the banknote substrate market but were unable to do so,” Innovia said in a statement.
The Bank of England would not comment on what it knew about the corruption allegations and prosecutions but said it had carried out due diligence on the company.
CCL said it expected Innovia to generate net revenue of about C$570m (£343 million) for 2017, CCL said.
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