UPDATED – Troubled investment company Guinness Peat Group has revealed plans to unlock shareholder value by spinning off its Australian business into a new listed entity followed by a planned float of thread maker Coats.Shareholders in the comp
UPDATED – Troubled investment company Guinness Peat Group has revealed plans to unlock shareholder value by spinning off its Australian business into a new listed entity followed by a planned float of thread maker Coats.
Shareholders in the company, founded by Sir Ron Brierely, will be asked to vote on the restructure in November once initial regulatory approvals are obtained.
The first step involves the demerger of GPG Australia, which holds a varied portfolio of investments with a net asset value of approximately $580 million, GPG said in a statement.
These assets would be bundled together and dual listed on the ASX and NZX.
All cash and liabilities would be allocated between GPG Australia and GPG Group before the demerger, with the latter initially retaining approximately 20% shareholding in GPG Australia.
GPG Group would retain its UK and New Zealand investment portfolios, which includes a 65% stake in Turners & Growers and a 35% stake in insurance company Tower.
After the demerger GPG Group would have a net asset value (NAV) of approximately $1.23 billion, including cash holdings of more than $220 million based on April 2010 valuations.
The proposal to spin off the Australian assets is understood to have been driven by director Gary Weiss, who is reportedly at odds with fellow directors Sir Ron, Tony Gibbs and Blake Nixon.
Plan for Coats
GPG said the restructure was an important prerequisite to an “efficient and value-enhancing” float of Coats, which GPG acquired in 2003.
Coats represents about a quarter of GPG’s investment portfolio but has struggled against the economic downturn post the financial crisis in 2007/08. In December GPG valued Coats at $635 million.
Uncertainty over the return from Coats has contributed to GPG’s sagging share price, which fell 20% last month. The shares have consistently traded at a discount of about 30% to NTA over the past three years.
GPG said today it anticipated a float of Coats within the next two years.
GPG said Coats had responded well to the financial crisis and had a much-improved performance in the 2010 year to date.
“Nevertheless it is considered that an immediate flotation of Coats is not in shareholders’ best interests given the nascent stage of recovery in relation to Coats’ markets and customers and the current uncertainty in relation to international financial markets.
“While Coats has taken longer than expected to turn around, its reorganisation is now largely complete. Under new chief executive, Paul Forman, Coats is pursuing a growth strategy.”
“Exciting opportunity”
Sir Ron said the board had been evaluating with management a number of alternatives and was conscious that substantial changes could not be indefinitely postponed.
Immediate liquidation under the current structure would “destroy value for shareholders given that GPG plc’s investments and actual and contingent liabilities (including in relation to pension funds) are at varying stages of maturity and liquidity.
“This proposal will create an exciting and regionally-focused activist investment company in Australia with the entrepreneurial flair to create value for shareholders in the best traditions of GPG,” Sir Ron said.
GPG said that there was also potential for similar geographical separation of the New Zealand and UK interests.
GPG shares rose 1c to 67c on the NZX this morning.
