KEY POINTS:
Guinness Peat Group is in the dog box with market operator New Zealand Exchange for allowing its shares to trade on Thursday morning without disclosing that key subsidiary Coats had been fined $230 million by European regulators.
The European Competition Commissioner issued a public statement about the fine
late on Wednesday night New Zealand time but GPG shares traded on the NZX for two hours on Thursday morning without the company informing the market of the penalty. They fell 5c to $1.93 before NZX became aware of the fine and placed the shares in a trading halt at midday.
"We heard the information indirectly," said NZX spokeswoman Rowan MacRae.
"As soon as we heard, we had concerns that the market would be trading on an unevenly informed basis."
Investors largely took the news in their stride when GPG's shares began trading again yesterday after the company released an announcement from Coats before the market opened. GPG shares ended the session with a comparatively minor 4c loss at $1.89.
Nevertheless MacRae said NZX would take the matter up with GPG, "and these issues will be dealt with accordingly".
GPG New Zealand director Tony Gibbs yesterday said his company did not see fit to issue a statement to the NZX on Thursday because the news was already in the public domain and GPG had not had a chance to convene a Coats board meeting to consider a response. However, the lack of an announcement to the market on Thursday also raised eyebrows among investors.
Rickey Ward of Tyndall Investments said news of the fine was material to GPG's share price and should have been fully disclosed as soon as possible.
"Much as I like GPG as an investment, I thought it was a little bit poor," he said.
The affair highlighted GPG's general lack of disclosure, which he believed was the reason the investment company consistently traded at a discount to its net asset backing.
Coats' fine was part of €369 million ($699 million) in penalties handed out by the European Competition Commissioner to seven companies for operating a series of cartels in the European market for zips and other clothing fasteners between 1977 and 1999.
In its statement, Coats said it would "vigorously appeal" the fine in court once it had received full details of the commissioner's decision, which are expected within the next month.
Coats said the size of the fine was "grossly disproportionate to any possible impact" that the alleged cartels had on the European haberdashery market. "Our customers certainly have not been injured."
Coats reiterated Gibbs' comments yesterday, saying "any anticipated eventual payment of fines is adequately covered by existing provisions".
Yesterday Gibbs said Coats would not disclose the amount of that provisioning.
"You don't go signalling to the court what sort of provisions you've got in your accounts. That's asking them to whack you with that."
Coats, which Gibbs said was "in a terrible mess" when GPG first bought into it, is a key investment for Sir Ron Brierley's investment company, accounting for as much as a third of its asset base.
GPG assumed full control of Coats in 2004 for more than $1 billion and has been working to turn the company, the world's largest threadmaker, around ever since.
Up for discussion
* English haberdasher Coats, owned by Sir Ron Brierley's Guinness Peat Group, has been fined $230 million by European regulators for fixing prices with rivals.
* GPG shares traded on the NZX for two hours on Thursday morning without a market announcement of the fine.
* The NZX says investors traded the shares "on an unevenly informed basis" during that period and it will take the matter up with the company.
