KEY POINTS:
Sir Ron Brierley's Guinness Peat Group yesterday vowed to fight the $230 million fine slapped on its English threads business Coats by European regulators who say it was involved in a price fixing racket.
The European Competition Commissioner has fined Coats €122 million ($230 million) for its role
in a series of cartels which controlled prices for zips and fasteners and associated equipment in the clothing industry over two decades.
The cartel members, which also include the world's largest zip maker, YKK of Japan, were fined a total of €328.6 million ($623 million) for co-ordinating prices, carving up markets between themselves and providing each other with "commercially important and confidential information".
"The highest management of these companies was well aware that this conduct was illegal but decided to continue anyway," said EU Competition Commissioner Neelie Kroes.
Coats' fine might have been even bigger, but it had co-operated with the EU's six-year investigation.
Nevertheless, GPG's New Zealand director, Tony Gibbs, said the fine was "absolutely outrageous, out of all proportion to any alleged offence".
Coats, which GPG acquired for $1.1 billion in 2004, accounts for 30 to 40 per cent of its asset base by value. A turnaround at the faltering giant is seen as key to GPG's performance.
GPG last month reported a 185 per cent increase in half-year net profit to £94 million ($255 million) with Coats making US$24.7 million ($33.5 million), up from US$23.1 million ($31.3 million) on revenue of US$820.7 million ($1.1 billion), up from US$806.7 million ($1.09 billion).
While Gibbs said Coats and GPG had some time ago made "significant provisions" against the likelihood of a fine resulting from the EU's investigation, "nothing was picked of this order".
The fine was for alleged activities during the late 1970s and 1990s, before GPG invested in Coats.
This week Coats had a €30 million EU fine for price fixing in the haberdashery and sewing needle market reduced to €20 million following an appeal.
Earlier this year, Gibbs said Coats was "an enormous business on which we've spent millions in restructuring".
"We are drawing to the close of that and we are very comfortable with our investment."
Yesterday, he said Coats was running very well.
GPG shares fell 5c to $1.93 in early trade yesterday after the fine was revealed in Europe, but they were placed in a trading halt at midday. The shares remained in the trading halt by the session's close and Coats was to make an announcement to the market on the matter early today.
Cutting it fine
* English company Coats, owned by Sir Ron Brierley's Guinness Peat Group, has been fined nearly a quarter of a billion dollars by European regulators for colluding with rivals on prices for zips and other clothing fasteners.
* GPG's Tony Gibbs says Coats and GPG will appeal against the fine.
* GPG's shares remain in a trading halt until Coats makes an announcement to the market today.