LONDON (Reuters) - Activist investor Crystal Amber on Tuesday said De La Rue was "highly vulnerable" to a takeover after disclosing a stake in the company that makes banknotes and passports, the group's fund manager Richard Bernstein told Reuters.

Crystal Amber on Monday revealed a 3.11 percent stake in De La Rue, which recently issued two profit warnings and lost the contract for Britain's' new post-Brexit blue passports to Franco-Dutch digital security group Gemalto.

Bernstein said he told De La Rue Chief Executive Martin Sutherland at a meeting on Tuesday that the company had made itself "highly vulnerable" to a takeover from one of its competitors unless it makes changes.

"It is a hugely attractive business," Bernstein said. "We want to see the market rating this company higher because otherwise it's going to get taken over soon."

"If you set this business up from scratch with the contracts it has, and its customer base, you'd be looking at 900 million pounds to a billion (pound) value and the market values it at 530 million (pounds)."

A spokesman for De La Rue said: "The Board and management maintain regular dialogue with our shareholders and remain focused on executing on our strategy which will deliver long-term shareholder value."

France's Oberthur Technologies made an attempt to buy the company in 2010 at 935 pence per share -- an offer that De La Rue management rejected.

De La Rue, which prints 7 billion banknotes and 15 million passports a year, issued a profit warning on March 20, sending its shares plummeting 14 percent, and a second profit warning on April 18, prompting the stock to fall another 6.3 percent.

De La Rue's shares ended down around 1.1 percent on Tuesday.

Bernstein said Crystal Amber, which has 250 million pounds in assets under management, would continue to increase its stake, with the aim of being a top two or three shareholder.

(Reporting by Maiya Keidan, additional reporting by Paul Sandle. Editing by Jane Merriman)

By Maiya Keidan