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Daily ShareChat: GPG

By Jenny Ruth

Tuesday 6th July 2010

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Sacked Guinness Peat Group director Tony Gibbs' alternative restructuring plan was simply to do what chairman Sir Ron Brierley has been promising for two years, says ASB Securities analyst Florian Burch.

The GPG board said Gibbs' proposal "fails to take account of the complexities inherent in GPG's current structure," including the various stages of maturity of its investments and the condition of its biggest investment Coats, and contradicts external advice.

"If those elements do indeed prevent a tangible return of value to shareholders, what was the chairman doing promising such a return of value for the last two years?" Burch asks.

"Going by the shape of the board's initial proposal and by the reasons it gave for dismissing Mr Gibbs' proposal, it now appears the chairman's promises bore little chance of being kept in a foreseeable timeframe," he says.

The company has made little effort in the last two years to keep the chairman's promise or to manage its investments to a point of maturity, Burch says. "Why has it recently increased investments in Australia (eg in MMC Contrarian, Tandou and PrimeAg) that now seem to be being held up among the reasons not to return cash as promised?"

Gibbs has at least achieved partial success with the board deciding to appoint three independent directors to lead the restructuring, Burch says.

Investment rating: outperform (but with high risk attached due to the uncertainty around the shape of any restructuring).

Daily ShareChat articles report how the main experts in the market might view a certain share and we provide this commentary as a useful resource for investors. Content on this site does not in any way constitute a recommendation to buy, hold or sell any particular share. Investors should always seek professional advice before making any investment decisions.

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