Sir Ron Brierley’s Guinness Peat Group (GPG) has finally produced its much anticipated corporate restructure designed to put some pep into its share price.
The first step will see GPG Australia separate from the parent group, with the aim "to facilitate the unlocking and enhancement of value for all GPG plc shareholders", GPG said in a statement to the ASX yesterday.
The UK-based GPG plc group would retain its British and New Zealand investment portfolios, but even those could be separated over time.
The move was foreshadowed by long time chairman, Sir Ron Brierley, who stepped down at the recent GPG AGM.
He told the meeting and later said in a statement that the company had had two bad years and the need for substantial changes was "inescapable".
The major asset (and big weight on the company’s shares) has been the British subsidiary Coats, which has dragged down the normal investment company discount that GPG shares have traded at to net asset backing.
GPG’s Australian assets include stakes in power company Alinta, building products firm Capral and interests in food, property development and financial services.
"This proposal will create an exciting and regionally focused activist investment company in Australia with the entrepreneurial flair to create value for shareholders," Sir Ron Brierley said in a statement today.
Shares in GPG were down half a cent at 54 cents and have underperformed this year.
They are down 12c or just over 18% since the start of January when they were trading around 65-67 cents. Our market is now down around 10%.
Under the plan, GPG would initially hold 20% of the Australian business, which would have a net asset value of around $469 million, with existing shareholders being given shares in the new entity.
The remaining British and New Zealand assets would be retained in the existing company, with an estimated value of $993 million.
GPG would also look to float its underperforming major subsidiary, British threadmaker and zip manufacturer Coats, at some stage in the future, but says there’s no need for the immediate liquidation of other assets. That would destroy shareholder value, it added.
Shareholders would vote on the restructuring and demerger in November.
GPG has a large number of New Zealand and Australian shareholders after it was split off from New Zealand’s Brierley Investments in 1991.
The company told the market that the restructuring had been considered alongside a range of alternatives which ranged from no change to a liquidation of all group assets.
GPG said that restructuring was considered the best option because it would help expose the collective value of the group’s large portfolio of assets which were now obscured by corporate complexity and geographical diversity (not to mention the attendant currency problems of three or four major currencies).
The final decision to proceed will be after a range of factors being finalised including the most appropriate capital structure for the two companies, market conditions, regulatory and other third party approvals.
