Oberthur, which produces credit card technology as well as banknotes, made an "oral indication" on Saturday that would improve its offer from 905p a share to 935p a share, a 69 per cent premium to De La Rue's closing share price on 29 November.
Despite this, De La Rue said yesterday morning its board had unanimously rejected Oberthur's revised proposal as it "significantly undervalued the company and its prospects".
The decision by Oberthur to walk away from the bid sent De La Rue's shares tumbling by 124.5p, or more than 15 per cent, to 695p. Ahead of the French company's statement shortly before the markets closed, De La Rue's shares had been more than 3 per cent higher.
In its statement Oberthur said it was "disappointed" that De La Rue's board had so swiftly rejected Saturday's fully financed proposal.
The French suitor said that "bearing in mind the significant difficulties being encountered by De La Rue and the structural changes occurring in the global banknote paper market", its shareholders might question how long it would be before the UK company's share price attained the level of the increased offer.
It is understood that Oberthur had agreed £400m of financing with Bain Capital to increase its offer.
Shares in De La Rue had hit 1,021p in 2010, but they dived after production problems emerged in August at its paper mill in Hampshire. This led to its chief executive, James Hussey, quitting. He was replaced by Tim Cobbold in December.
The production problems are thought to have been related to a contract with Reserve Bank of India, which is currently suspended. For the latest updates PRESS CTR + D or visit Stock Market news Today
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