Plans to demerge Guinness Peat Group Australia should be dropped as it is not backed by shareholders, according to GPG director Tony Gibbs.

"Following the announcement, it has become very clear to me that the GPG Australia demerger proposal does not have the support of many of our shareholders and would not succeed," he said today.

Mr Gibbs suggested another approach that involves a material cash distribution to shareholders, restructuring of the GPG Group to allow an efficient exit of Coats Group, and making ready for a trade sale or float of Coats.

Guinness Peat Group last week proposed to separate GPG Australia from the rest of the group. The $1.4 billion demerger and board changes has had a lukewarm response from the market due to the delayed action on the group's troubled investment in British threadmaker Coats.

The poorly performing Coats was the key to the big 38 per cent reduction between GPG's share price and net asset value, according to Goldman Sachs JBWere's analysis of the deal

"By demerging the Australian listed businesses as the first step and effectively delaying any action on Coats, we struggle to see how the proposed restructuring will materially close the current . . . discount," analyst Adrian Allbon said.

GPG plans to list the Australian business and address persistent governance concerns by appointing a non-executive chairman and a majority of independent directors.

Ron Brierley will hold the chairman's job at GPG, which will initially retain 20 per cent of GPG Australia, but become a non-executive director of the local business. His long-time colleague Gary Weiss is expected to be chief executive.