GPG shares drop after Gibbs dumped

Tuesday 29th June 2010

Shares in Guinness Peat Group sank more than 5% after the investment company sacked long-serving New Zealand executive director Tony Gibbs.

Gibbs was sacked after he made an "unauthorised public statement" criticising the company's demerger plan.

The shares fell 5.9% to 64 cents on the NZX today after chairman Ron Brierley announced Gibbs had been dumped for a “serious breach of boardroom protocol.” The decision was made “with much sadness but was unavoidable,” Brierley said in a statement which signaled the end of a personal association with Gibbs that goes back more than 20 years.

Gibbs said he was “fired for telling the truth” in his statement objecting to the investment company’s plan to spin off its Australian assets. GPG announced the proposal on June 16, giving its long-suffering shareholders some idea how it planned to return value to investors, an idea it first mooted before the global financial crisis. His stance may have provoked some action, though, as Brierley also announced that three independent directors would be appointed with a key role in reviewing strategy.

But Alan Moore, who helps manage $600 million at Milford Asset Management, said that while GPG emphasised its investment returns over the last 20 years, "the last five years has been pretty awful."

"If you were a fund manager you would have lost your job by now,” he said.

The demerger proposal “was not well received by the market,” as reflected in the stock price, Moore said. Still, the shares do have some value, which is reflected in so-called value investors like Accident Compensation Corpororation lifting its holding.

Shares of GPG sank as low as 61 cents on June 22. They traded as low as 44 cents in March last year. In 2006 they traded above $1.80. The firm’s performance has been marred by Coat’s, the unprofitable European thread-maker that represents its biggest investment and which it ultimately wants to divest.

Gibbs said he was notified of the decision on a conference call at 7 pm yesterday, which he says was “quite a sad meeting” with “a thread of emotion” running through it. Still, the process was “all handled in a very grown-up way and I am not an unhappy man,” he told BusinessWire. “I wish them all the best for the future.”

“I must be the only guy ever to have been fired in New Zealand for telling the truth,” Gibbs said. “It was a big call to go with what I thought was right or upset my colleagues.”

He is “very pleased” to be keeping his role as chairman of insurer Tower and Turners & Growers, two of GPG’s biggest investments in New Zealand. Gibbs holds 9.37 million shares of Guinness Peat, worth about $6 million at today’s price. Brierley holds 44 million shares and UK-based director Blake Nixon has 16.9 million, according to the latest published figures.

Australian executive director Gary Weiss’s stake may be via a trust and wasn’t immediately clear. Weiss would run the demerged Australian business under the original GPG proposal.

Brierley’s announcement of the sacking today marked the first time he had publicly acknowledged disagreement over strategy at board level.

“Tony was a great achiever for GPG in earlier times and we worked together, closely and effectively, for nearly 20 years,” Brierley said. Still, in more recent times there had been “increasing difficulties, culminating in last week’s serious breach of boardroom protocol.” In the circumstances, “there was no alternative to the action taken.”

Instead of a demerger, Gibbs advocated a “material cash distribution” to shareholders before the end of the year and preparation of Coats, its largest investment, for sale.

He warned against spending six months and shareholder funds to try to advance the demerger.His position was supported by shareholders including Westpac’s BT Funds Management unit, which holds about 27.6 million shares, or 1.7% of the company.

“We were getting a bit frustrated with what was going on with the business in general,” said Paul Richardson, BT’s chief investment officer, who put his name to an open letter to GPG urging support for Gibbs’s alternative plan.

Since then “we’ve had good contact with Weiss and response from the board,” he said. Brierley’s announcement today showed “a number of things we were hoping for have been recognised,” Richardson said.

GPG has a large number of retail investors, who would be loyal to Brierley, Gibbs as the New Zealand face of the firm, and Weiss. Dissension at the board and a senior executive leaving may indicate the restructuring process will take longer, Richardson said. BT sees value in the shares “or we would not hold as much as we do,” he said.

Brierley said Gibbs’s alternative plan “fails to take account of the complexities inherent in GPG’s current structure.” The group also had to deal with tax complexities across various jurisdictions and Coats, while on the mend, isn’t at the stage to be sold via an initial public offering.

Brierley said the remaining executive directors won’t participate in any decisions by the board relating to the restructure.

“My sole objective remains optimising value for GPG shareholders and I believe GPG’s current business needs to be simplified and streamlined to enable this,” he said.

Businesswire.co.nz

Comments from our readers

No comments yet