Late raid on Guinness Peat shares pushes price to 2 ½-year high

George Soros

Shares of Guinness Peat Group [NXZ:GPG], the cash-rich owner of a thread-making business that's attracted investors including George Soros,  jumped to a 2 ½-year high after someone scooped up 1 percent of the company.

The shares climbed as high as 64 cents yesterday after an investor, likely to be an offshore fund, bought 19.7 million shares just before the close of trading. The stock traded at 63 cents today and has gained 7.6 percent so far this year.

GPG has about 404 million pounds of cash after selling its investment portfolio. It aims to return capital to shareholders and rebrand as its sole remaining asset, UK-based threadmaker Coats, though any return is on hold until it resolves a dispute with the UK's pension regulator. Its pension liabilities will reduce as global interest rates begin to rise, closing the gap on rates used to benchmark those funds.

"Someone paid a reasonable premium to get that stock," said James Lindsay, portfolio manager at Tyndall Investment Management. "The pension scheme did hurt them, but if you were to take a longer term view about UK interest rates normalising, it would help reduce those pension rates."

Soros is among offshore investors in GPG, having bought an 8 percent stake in the company last year. Others include US bank JPMorgan and American fund manager Invesco.

In a statement made by the GPG chairman to the NZX in December the board expressed uncertainty about when the dispute may be resolved.

"The GPG board is deeply concerned that despite the enormous cost and management effort which the regulatory intervention is imposing on both GPG and Coats, we are still not close to a conclusion of these matters," said the statement.

Shortly before Christmas the regulator delivered a warning to the company that its pension funds were insufficiently funded, however whether this will result in any further 'financial support direction' for the pension plans is not yet decided.

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