3i to hand back £500m to shareholders

The listed private equity firm’s full year results show exit realisation proceeds of £1.3bn and a 15.9% total return on shareholder funds totalling £512m.

Global private equity firm 3i has announced its full year results for the year ended 31 March 2005, in which it generated profits of £260 million (€380 million; $487 million).

The firm’s bumper exit year – it realised £1.3 billion and a further £400 million

Our returns have been such that it makes sense to propose a return of capital to our shareholders.

Philip Yea, chief executive, 3i

from co-investment funds – has put it in a position to make a £500 million capital return to its shareholders.

Successful exits during the year included 12 IPOs, the refinancing of European directories business Yellow Brick Road (which is reportedly on the auction block again) and the £525 million sale of nursing home operator Westminster        Healthcare.

The return, which will take the form of a £250 million special dividend and a £250 million share buy back, was welcomed by chief executive Philip Yea who said: “Our returns have been such that it makes sense to propose a return of capital to our shareholders.”

The strong exit environment over the last 12 months allowed 3i to reduce the number of investments in its portfolio from 1,878 to 1,502. Within that, the firm’s SMI (small and medium investment) portfolio shrank from 1,079 to 807.

3i has an ongoing, medium term initiative to further reduce the number of SMI companies in its portfolio in order to allow the firm to make a smaller number of higher value investments in the future. London-based director Bill Anthony recently took over from Charles Richardson as head of the SMI team.

Operating three business strands globally – buyout, growth capital and venture capital – the firm had 28 global offices as of 31 March 2005 (although it has since announced its intention to close its offices in Birmingham and Reading in the UK and Düsseldorf in Germany).

Although the firm’s investment in Asia represents only around 4 percent of total

Philip Yea, chief executive, 3i

 investment, the firm is stepping up its activity there by opening a new office in Shanghai and launching a recruitment initiative in India to launch a growth capital team there, headed up by Anil Ahuja, formerly of Citibank India.

In Europe, the firm has been particularly active in terms of senior level recruitment. Aside from new finance director Simon Ball and HR director Denise Collis recruited last year, the firm has also been bolstering its investment teams.

In January Stephan Kruemmer was appointed managing director of the firm’s German operations. In February, the European buyout business was boosted by the arrivals of Alan Giddins from SG Corporate & Investment Banking and Andrew Golding, former head of the financial sponsors group at Bank of America Securities.

3i is currently investing from its €3 billion Eurofund IV, which was 44 percent committed at the end of March, with investments in 30 companies. The fund, which closed in June 2004 with €900 million of commitments from 25 external investors, was re-opened later in the year to allow a pool of 15 investors, including Dubai International Capital, to commit a further €200 million.