GPG launches anticipated buyback

Last updated 09:38 04/09/2012

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Guinness Peat Group's share price will be in the spotlight today after the investment holding company unveiled plans to buy back £10 million (NZ$19.9m) worth of shares.

The share repurchase is subject to a maximum price of 105 per cent above GPG's average trading price on the London Stock Exchange five days prior to start of the buyback.

It kicks off on September 7 and is being managed by Macquarie Capital.

Buybacks are one of the ways firms can return capital to shareholders by using the company's assets to purchase stock and lift the share price.

GPG shares closed at 49.5c yesterday, and have shed about a quarter of their value over the past 12 months as $259m in pension fund liabilities and a €110m (NZ$175m) fine for anti-competitive behaviour weighed over the firm.

Last month GPG posted an interim net loss of $70m, $95m lower than a year ago due to the impact of the fines and softer macroeconomic environment.

The company is currently in the throes of winding itself down and returning the proceeds to shareholders.

At the time of the interim results, GPG Chairman Rob Campbell said market conditions were not conducive to natural share price appreciation or asset selloffs, which is presumably why the firm was mulling a buyback.

Broker Forsyth Barr estimated the underlying net asset value of the shares at 82c apiece before the share buyback was announced, and by GPG's own calculation the firm's net asset backing stood at 74c as of June 30.

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