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Oligarch's Fund Swoops For £500m Banknote Firm

Oligarch's Fund Swoops For £500m Banknote Firm

A fund backed by a billionaire Russian oligarch is closing in on a £500m takeover of one of the companies vying to produce the next generation of plastic currency for the Bank of England.

Sky News has learnt that Pamplona Capital Management has entered exclusive talks to acquire Innovia Films, a manufacturer of speciality products for the packaging, labelling and securities industries - including the creation of materials for use in polymer banknotes.

Pamplona is likely to pay in the region of £500m for Innovia, which already counts 20 central banks among its customers, including the Bank of Canada, from which Mark Carney departed to become Governor of the Bank of England earlier this year.

Pamplona is backed by Alfa Group, a company headed by Mikhail Fridman and one of the members of the AAR alliance which last year agreed to end its conflict-plagued joint venture with BP in Russia by selling out to Rosneft, the Kremlin-controlled energy giant.

The deal netted Mr Fridman and his partners at least $7bn each, cementing their status among the world's wealthiest individuals.

The negotiations between Pamplona and Arle Capital Partners about the purchase of Cumbria-based Innovia have not yet been completed and could take several weeks to reach an agreement, according to people close to the talks.

The deal is likely to be struck at around the same time that the Bank of England announces the outcome of a public consultation about a move to polymer banknotes, a decision that would end more than three centuries of paper banknote production.

Polymer notes are more difficult to counterfeit because they contain a plastic film which is produced by specialist machinery.

Innovia is viewed as a strong contender to win a role producing polymer bankotes for the UK central bank, although it faces stiff competition from De La Rue, the incumbent producer of the Bank of England currency.

If Innovia does secure the contract once its takeover goes through it would place the company under the ownership of a fund with close links to one of Russia's wealthiest oligarchs.

Pamplona is in talks to buy Innovia from Arle, which manages the residual investments of Candover, one of the original giants of the private equity industry but which ran into trouble during the financial crisis.

Innovia is the final investment in Candover's 2001 fund to be sold although there remain several investments made by Candover's 2005 fund under Arle's management.

A number of other private equity firms tabled offers for Innovia but have seen their bids rejected in favour of Pamplona's, insiders said.

Arle and Pamplona declined to comment.