interesting ft article

http://www.ft.com/cms/s/0/17b5ae0e-8a0f-11e0-beff-00144feab49a.html#axzz1O4s64nWd

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GPG sales put Coats in an enviable position

By Michael Kavanagh

Published: May 29 2011 20:33 | Last updated: May 29 2011 20:33

Senior executives at Coats, the world?s leading supplier of threads to the clothing trade, stand to make up to $100m under an incentive scheme when the company re-emerges on the London Stock Exchange after its 2003 delisting.

Guinness PeatOwner Guinness Peat Group, the corporate raider that took Coats private nearly a decade ago, has agreed to a stepped incentive package which offers its subsidiary?s chief executive Paul Forman and other senior employees up to 15 per cent of any increase in the company?s value above $1.35bn over the next three years.

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Coats, an original FTSE 30 constituent, was acquired by GPG for ?414m ($683m) in 2003 but was only valued internally at about ?320m at the end of December 2010. Mr Forman, formerly chief executive of Low & Bonar, the FTSE Small Cap industrial materials maker, took over as Coats chief executive at the end of 2009.

Blake Nixon, director of Coats who expects to move from an executive to a non-executive director?s role at GPG in July, said the total amount available would be capped at 9.9 per cent of GPG?s own capitalisation at the time of the scheme?s close on 31 March 2014.

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This would create a maximum pay-out of about $100m for top executives should Coats perform successfully as the sole operational interest of GPG following its controversial decision to sell off its remaining assets in the UK, Australia and New Zealand.

Mr Nixon defended the generous terms of the incentive scheme, describing it as typical of those enjoyed at many private equity firms or at the riskier end of publicly listed companies. He added that if top managers hit the top limit it would represent a ?win-win situation? for shareholders.

He said the early completion of asset sales by GPG could see the name of the remaining listed entity being changed to that of the rump Coats business. Please respect FT.com's ts&cs and copyright policy which allow you to: share links; copy content for personal use; & redistribute limited extracts. Email [email protected] to buy additional rights or use this link to reference the article - http://www.ft.com/cms/s/0/17b5ae0e-8a0f-11e0-beff-00144feab49a.html#ixzz1O4sg9qio

The sell-off strategy was agreed after a number of boardroom splits over the past two years and a shareholder revolt in the wake of a fall in the valuation of its business in 2008 and 2009.

GPG continues to trade at a discount of about a third to its own valuation of ?993m for its investments, which apart from Coats spans interests in financial services, food processing, building services and food distribution. More than half the portfolio by value is held in companies based in Australia or New Zealand.

GPG is committed to returning ?75m from asset sales to shareholders this year. Among UK investments being prepared for sale by GPG are stakes in Newbury Racecourse, brewers Young?s and Co, Daniel Thwaites and Shepherd Neame, car delivery company Autologic and Nationwide Accident Repair Services.

Under its current owners, Coats ? an early investor in China, Vietnam and other Asia-Pacific centres of textile and clothes making ? has reduced its exposure to the US and Europe.

GPG argues that Coats, which supplies threads to 22 per cent of the global apparel market, can continue to improve sales and profits.

Last year turnover rose from $1.41bn to $1.58bn with pre-tax profits jumping from $36m to $107m,

Gap, Levi Strauss jeans, Adidas, Marks and Spencer, Nike and Abercrombie & Fitch are among those brands using Coats threads and yarns, which are used in the manufacturing of clothing, sports shoes, furniture and bedding as well as airbags and safety belts in cars, and parachutes used by Nasa space vehicles.