GPG keeps it Kiwi but has yet to put its money where its mouth is?

Friday 3rd August 2001

By Deborah Hill Cone

Listed investment company Guinness Peat Group says it is looking after its mainly Kiwi shareholders by choosing to raise its debt here rather than offshore.

Through subsidiary GPG Finance it has launched the country's single biggest capital notes issue, a $250 million capital raising, offering a 9% interest over five years - but only to New Zealand investors.

In 2006 the notes can be rolled over or converted into shares in GPG.

The $250 million will swell GPG's warchest to $500 million but the company is not indicating what it will use the cash for.

At a briefing GPG executive director Tony Gibbs said current investment was targeted principally at Australasia so as to achieve a more even balance with the level of investment in the UK.

Its Australian and New Zealand investments are estimated to be worth $390 million, accounting for about 29% of its total portfolio. But Mr Gibbs joked that the board liked to open its meetings by singing God Defend New Zealand, reflecting the fact 80% of GPG's shareholders are Kiwis.

Mr Gibbs espoused the GPG philosophy that "good investments are you where you find them."

"New Zealand is a tiny market and there are some opportunities here - we identify them from time to time, but unless the opportunity is the right opportunity we are not going to take it," Mr Gibbs said.

"This is my personal view ... it would be nice to be able to find a stunning investment in Australasia."

The company has been reaping rewards from some successful investments overseas including the world's largest independent automotive distribution group Inchcape (it owns 8%), textile manufacturer Coats (12.2%) and Australia's largest producer of malt, Joe White Maltings (52%).

Lead manager of the capital notes J B Were said cash raised in New Zealand dollars may easily be converted to other currencies and hedged if is used to invest offshore.

In a report Forsyth Barr Frater Williams says it is optimistic about GPG's medium term outlook and recommends clients should buy in at $1.74.

Forsyth Barr said it agreed with company founder Sir Ron Brierley that this year was critical for GPG.

"We think 2001 will be a case of 'show me the money' so to speak as gains from investments made in 2000 are crystallised," a report said.

GPG notes issue set to 'go like a rocket'

There were louder than usual grumbles yesterday as the broking community moaned about its scant allocation of GPG's $250 million capital notes issue.

Brokers expect the offer, which they describe as well-priced, to "go like a rocket" - but complain they have been given tiny allocations by lead manager and underwriter J B Were.

On one example a single adviser who asked for $750,000 worth of capital notes for his clients was allocated only $20,000.

That means when brokers get inundated with calls from punters who have seen the high profile marketing campaign for the issue - starring Sir Ronald Brierley - they may have to turn them away emptyhanded.

There is no public pool so clients will have to go to J B Were to get some.

That has not pleased brokers who warn J B Were's decision to keep the action for itself may backfire if the tables are turned.

"Not every issue is an easy issue - sometimes you need every shoulder to the wheel," a broker said.

But J B Were's Andrew Barclay said the firm had kept only 25% of the allocation for itself and other big broking firms would each have got about 10% with the rest spread around other financial institutions and intermediaries. "That's a pretty fair allocation," he said.

Mr Barclay said while all the capital notes were placed with brokers there were no signed subscription forms so the public relations campaign was needed to help firms shift it to their clients.

- Deborah Hill Cone

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