17 Jun 2010

Restructuring by GPG not enough

7:05 am on 17 June 2010

Analysts say Guinness Peat Group's long awaited restructuring plan does not go far enough, and it's unlikely to boost returns to investors in its current form.

The listed investment company plans spin off its Australian business and list it as a seperate company on the sharemarket. It also plans to also float its struggling thread business Coats in the future.

But market commentators say shareholders are likely to be disappointed with lack of detail and a failure by the board to address its corporate governance issues.

GPG has been under pressure to restructure its business to provide better returns to investors, as it's portfolio has underperformed and its share price has tumbled.

But Forsyth Barr an analyst Guy Hallwright says it's hard to determine whether GPG's plans will revive the company, because it does not go into enough detail.

He says the market had been expecting asset sales, rather than the listing of its Australian business and a future listing of Coats.

GPG executive director Tony Gibbs, admits debate amongst directors had been rebust as to whether the Australian business should be separated.

Mr Gibbs says the changes, and listing of Coats, are both designed with investors in mind.

He says GPG's board, which has been criticised for not having enough independent directors, will also undergo a shakeup, and there will be new independent directors.

One of GPG's biggest critics, Brian Gaynor of Milford Asset Management says the restructuring plan is a positive step, but new blood on the board is crucial to its success.

GPG shareholders will vote on the proposal in November, after regulatory approval is obtained.

GPG shares, which have fallen by a third over the last year, remained unchanged at 66 cents on Wednesday.