3i Group has booked realisations of £195 million in the first quarter of the year, as the London-listed firm continued its busy run of divestment activity.
The divestments in the first quarter generated realised profits of £59 million, which was an uplift of 43 percent over the 31 March 2013 value, Julia Wilson, 3i’s finance director, told journalists during a conference call on Thursday.
Realisations in the period included the sale of IT services business Civica and the IPO of US healthcare business Quintiles. The divestments of Xellia, Trescal and Hyperion were not included in that figure and will generate further proceeds of £248 million, Wilson added.
3i, which has between 90 and 100 business in its current private equity portfolio, said the top 10 investments combined hold 50 percent of the total portfolio value.
3i, which continues its ongoing restructuring, is making “good process”, Wilson said. The firm aims to continue to “deliver realisations at good uplifts and book value”, she said.
To get back into conventional fundraising the realisations are a core part of that strategy in showing there is value in our existing portfolio, but showing that the private equity team can make good investments over a consistent period of time is also really important
“To get back into conventional fundraising the realisations are a core part of that strategy in showing there is value in our existing portfolio, but showing that the private equity team can make good investments over a consistent period of time is also really important,” she said.
“We have a number of assets which are prepared for sale, which may or may not happen over the course of the year. But we also have companies that we call ‘keepers’ that we think are long term value generators for our group,” she added.
3i can’t invest from its current funds, because they’re all past their investment deadlines. Additionally, Simon Borrows admitted in recent months that he doesn’t see 3i raising a pan-European buyout fund again “for several years”. In a conference call in May, Burrows blamed “pretty fruity prices” for 3i’s lack of investment activity.
The firm is however planning to invest from its balance sheet and has recently seen investment opportunities picking up, particularly in Northern Europe and the US. The firm sees opportunities to invest in US businesses which have a European angle and looks for deals in Northern European places like Germany and Benelux, where 3i has had “a good track-record”, Wilson said. 3i said “conversations the firm may have had towards the end of last year are now getting into a position where it feels like there may be a deal to do”.
3i, which reduced its gross debt to £913 million at 30 June 2013 from more than £1 billion at 31 March 2013, will also focus on growing the business, particularly in infrastructure and debt management, Wilson said. In May, 3i said it made an offer to acquire Barclays’s European Infrastructure fund managements business, which will add £780 million to 3i’s assets under management as well as an investment team in London and Paris. 3i’s debt management business doubled its assets under management last year, Wilson said. However, Wilson insisted its private equity activity “is getting as much focus as the infrastructure and debt management [business]”.
Additionally, 3i will be returning 15 to 20 percent of gross realisations to investors, the firm said. The total amount of 3i’s distribution calculation for 2014 is £665 million, including the £222 million, which 3i received for Mold-Masters last year.