Gibbs says he's not ashamed to have broken ranks at GPG

Monday 28th June 2010

Tony Gibbs, who broke ranks with Guinness Peat Group’s board to criticise its demerger plan, says he doesn’t regret the move and wants the firm to expedite the sale of its biggest investment, the European thread-maker Coats.

The board rift came after the company’s announcement two weeks ago that it planned to spin off its Australian assets into a separate listed company while retaining Coats to avoid ‘destroying value.’

While Gibbs signed off on the plan at the time, he now says he did it “for all the wrong reasons.”

The unprofitable Coats is GPG’s single biggest investment, accounting for £295 million, or 26% of its balance sheet as at December 31.

The business was hit hard by the global downturn, as the textile industry reeled, but its net loss of £3 million last year was largely the result of a mismatch of tax across various jurisdictions, which wiped out its original £18 million profit.

Coats managed to reduce borrowings by £81 million last year.

“Coats is travelling quite well and weathered the recession quite well and it’s a great company – I mean that,” Gibbs told Sharechat. “In due course Coats may well be able to be delivered from within the bowels of GPG.”

He declined to say what he expects to happen now with GPG’s strategy and wouldn’t comment on relations with other board members, such as Sydney-based Gary Weiss, who has pushed for the break-up.

Chris Healy, the company secretary, said in a statement on Friday that GPG is still working over various details of the proposal and reviewing shareholder feedback.

Gibbs said of his statement on Friday shouldn’t have caught fellow directors by surprise as he had emailed head office and had been ignored prior to making his announcement.

“I did it – I’m not ashamed of it,” he said.

Shares of GPG climbed 3% to 68 cents today. They had sunk as low as 61 cents in the wake of the original demerger announcement.

Some fund managers already have swung in behind Gibbs. BT Funds Management said in an open letter to GPG’s board on Friday that a demerged GPG Australia would “trade at a significant discount to net asset backing and therefore will not improve returns for shareholders.”

An alternative strategy along the lines that Gibbs had suggested was ‘the best way to address the sizeable gap between the value of GPG’s assets and its share price,” according to the letter signed by BT Funds’ chief investment officer Paul Richardson, head of equities Paul Harrison and senior portfolio manager Matthew Goodson.

Under such a scenario, GPG would be restructured to allow a “material” cash distribution, stock buyback or some combination, and return to its original mandate of “concentrated, active investment.”

BT said GPG’s immaterial holdings “should be progressively exited” while an exit strategy for Coats that maximizes value for shareholders could be achieved on the timetable suggested by Gibbs.

The fund manager also wants an independent director appointed to the board.

Under GPG’s original proposal a demerger and restructuring was to have been finalized later this year with initial regulatory approvals in place in time to release full details of the plan in September, with documentation sent to shareholders in October and a vote in November.

GPG Australia would have net asset value of about A$450 million, based on the portfolio as at April this year. GPG's post-demerger NAV would be about £570 million, or $1.2 billion.

Businesswire.co.nz

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