Reaction may spell rethink for GPG

Happier times: GPG directors Gary Weiss (front row, left) and Tony Gibbs (front row, right) at the Tower annual meeting in 2003. Photo / Mark Mitchell

Guinness Peat Group may revise its proposal to split off the Australian assets into a separately listed company in the wake of a strong negative reaction from shareholders.

GPG revealed plans to split the business last Wednesday but both institutions and small shareholders have panned the deal, saying it fails to meet a promise made by chairman Sir Ron Brierley to return value to shareholders.

Australian-based Guinness Peat Group director Gary Weiss made a flying visit to New Zealand at the end of last week to talk to investors about the merits of the proposal, which is largely being seen as a Weiss initiative. But investors remain unconvinced.

Rickey Ward, domestic equities manager of Tyndall Investment Management, said he stood by his view that the asset split did nothing to return value to shareholders. "There is nothing to warrant going down this route."

John Hawkins of the New Zealand Shareholders Association said Weiss hadn't come up with anything new that investors didn't already know.

"It's going to be a hard one to sell," he predicted.

Yesterday a spokeswoman for Weiss said the decision to visit investors had been designed to provide them with an opportunity to give feedback.

She said the proposal had always been painted as a first step and Weiss was open to modification of the plan if it was in the best interests of shareholders as a collective.

"The whole purpose of the process is to enhance shareholder value."

One market source said one way to sweeten the deal would be to sell off GPG's investment in Australian sugar manufacturer CSR.

GPG owns about 5 per cent of the Australian listed company and the sale could release up to $100 million which could be used to return value to shareholders before the business was split.

The sale would potentially reduce the value of the assets in the Australian business from $500 million to $400 million.

The concept is thought to be supported by some directors on the proviso that Weiss leaves the board of parent company GPG Plc.

The spokeswoman for Weiss said the directors could not comment on talk of the sale of any specific assets.

Weiss has said he is keen to stay on the board of GPG Plc if investors are happy for that to happen.

But ING head of equity Mark Brown said he did not believe removing directors from the board would be in the best interests of the business.

"The best thing now would be to get a timeline on the sale of assets. There are a number of assets which I think the value of which seems fairly mature."

Brown said he did not believe GPG could add much more value through its ownership of CSR or its investment in British pub chain Youngs.

He said GPG could also consider selling its stakes in Tower and Turners & Growers in New Zealand. "You have to wonder how much longer you would need to hold on to them."

GPG shares closed down 1c at 63c yesterday.