3i backs own single-asset restructuring

The UK private equity giant has grown its exposure to discount retailer Action, whose exiting LPs achieved a gross multiple of 31.3x.

3i has doubled down on a top-performing asset by backing a restructuring on its own fund.

Discount retailer Action, the sole remaining asset in 2006-vintage buyout fund Eurofund V, is being rolled into a series of vehicles managed by the London-listed private equity firm, according to 3i’s half-year results announcement on Thursday.

The 3i 2020 Co-investment vehicles are backed by 3i, a number of rolling investors and new institutional investors.

3i declined to comment on how many investors from Fund V rolled into the new vehicles, though some that did increased their exposure, it noted. 3i is the largest investor, sister publication Secondaries Investor understands.

The restructuring ran without an advisor and priced at a 12 percent premium to June net asset value, according to a source familiar with the process.

Secondaries Investor reported in September that 3i would run a single-asset restructuring on Eurofund V, which raised €5 billion by final close in 2006, to hold on to what it described as an “exceptional business”.

The deal gives the Netherlands-headquartered retailer a post discount enterprise value of €10.25 billion, equivalent to 18.2x the 30 September run-rate EBITDA. Exiting investors have realised a gross money multiple of 31.3x and gross internal rate of return of 75 percent since the original investment in 2011.

Action opened two more distribution centres this year and 86 stores in the six months to 30 June, resulting in a total store count of 1,409.

The deal will increase 3i’s net investment in Action to just under 50 percent from 44.3 percent, the firm noted. Its management of the 2020 Co-investment vehicles means it effectively controls 80 percent of the business, Secondaries Investor understands.

The process is one of several large single-asset restructurings taking place in Europe. Last month AlpInvest Partners, Goldman Sachs Asset Management and HarbourVest Partners emerged as the backers of PAI Partners‘ single-asset process on ice cream company Froneri in a deal worth around €1.8 billion.

Single-asset deals account for between 5 percent and 10 percent of the secondaries market by value, according to an estimate by managing director Jeff Keay of HarbourVest Partners.