GPG shares jump on wind-down plan, $158M capital return

Former GPG executive director Tony Gibbs who left after disagreement over the company's direction. Photo / Paul Estcourt.

Guinness Peat Group will return $158 million to shareholders this year and gradually sell down assets to the point where the Coats thread-making business is its only investment.

The shares jumped 5.7 per cent at the opening of NZX trading this morning, to 74 cents.The announcement has been a long time coming for shareholders of the diversified investment company, which abandoned alternative restructuring plans last year after a boardroom rift and protests from institutions.

Former director Tony Gibbs has welcomed the move, saying this was exactly what he had been pushing for.

Former chairman and founder Sir Ron Brierley had promised a substantial capital return as far back as 2008, when he first flagged his retirement. The global financial crisis put the plans on ice.

"As part of the orderly value realisation, GPG's investment portfolio may be reduced to the point where an investment in GPG becomes a pure exposure to Coats," chairman Mark Johnson said in a statement.

GPG won't make any new investments, signalling an end to a 20-year journey for the company, established by Brierley as his investment vehicle after severing ties with Brierley Investments.

Tony Gibbs described the decision to sell down most of the assets and return money to shareholders a "triumph" for all shareholders.

Gibbs, who was booted off the board last year after speaking out against plans to split off the Australian assets into a separate business, said the recommendation by the independent directors was "exactly where I was coming from last June."

"The new independent board have done a good job. Now we just have to make sure they implement it."

Gibbs, who remains a chairman of Tower and Turners & Growers which GPG owns significant stakes in, said he accepted those stakes would be sold and he was prepared to help aid the sale process.

"They are two jewels in GPG's crown and I am very proud to be chairman of them both."

Gibbs said it was a possibility that the stakes in both companies could be sold to foreign buyers but hoped they would attract local interest.

"I would be very hesitant to sell to hedge funds, these companies need to be kept whole and hopefully within the bounds of New Zealand. But they will be attractive to foreign buyers."

He didn't know what the sales would mean for his own future with the two companies.

"Maybe I will go with them, maybe I won't," he said.

Gibbs said he had promised New Zealand shareholders the next annual general meeting would be held in New Zealand and was pleased the GPG board had held to that.

"Small shareholders need to have a chance to ask questions of the directors."

GPG said this morning that cash proceeds from the sell-down will be used only to "pursue capital management initiatives" though the company will invest more in existing businesses as necessary.

The company is now seeking an executive to manage the asset sales, it said. The capital return and asset sales are based on a recommendation from GPG's independent directors' sub-committee, set up last September, to consider the company's strategy.

None of GPG's executives were involved, to ensure it was an arm's length decision.In the past five years, GPG shares have shed about 65 per cent of their value amid concern its investment model was stuttering as major investments including Coats were whacked by global recession, eroding profits.

The shares last traded at 70 cents and are trading at a discount to net asset value of more than 30 per cent. The independent committee concluded that GPG had a "a large, complex and geographically diverse portfolio of assets."

There was "a lack of value transparency with a number of unlisted investments, the largest of which is Coats" and its performance in recent years had been "disappointing."

In addition, the company faced a number of liabilities, including capital notes, pension liabilities and potential payment of a European Commission fine, which created additional uncertainty about the Coats investment.

GPG's investment portfolio has a market value of about $1.28 billion, excluding Coats, which is its biggest single asset, spread across New Zealand, Australia and the UK.

"The Board believes that attempting a short-term realisation of all of GPG's investment assets is unlikely to be optimal for shareholders relative to a strategy of orderly value realisation over the medium term," it said.

"GPG will also evaluate opportunities to sell groups of assets if this is considered value-enhancing for GPG shareholders."

The company also plans to simplify its management structure and reduce overheads.

GPG has retained Goldman Sachs & Partners and Greenhill Caliburn as advisers.

WITH TAMSYN PARKER