3i’s investment pace picks up, exits slow

The listed private equity firm invested £257m in the five months ended in August, up nearly 66% from the same period last year.

Wilson: Exits on the horizon

3i Group significantly picked up its pace of investment for the five months ended in August, though the value of realisations fell 71 percent as compared to the same period last year.

3i said it invested £257 million (€299 million; $408 million) during the period, up nearly 66 percent from the £155 million it invested during the same period last year. Buyouts accounted for £236 million of the total, up from £86 million from the same period in 2009, while growth capital investments comprised the balance.

Earlier this month the firm merged its buyout and growth capital divisions into one consolidated private equity business line, part of a broader restructuring that includes the addition of a credit-focused business line.

“The [private equity] mid-market is the most relevant to 3i,” Julia Wilson, 3i’s financial director, said during an analyst call Thursday morning. “The common characteristic we’re looking for in a company whether it is a buyout or a minority growth capital investment is that it has a high growth potential and a strong management team.”

She noted that pricing levels remained a concern for future investments, saying 3i would continue to take a “disciplined approach” on the matter. “This does however mean that there will also be some further opportunities to make realisations at attractive prices,” added Wilson.

For the five months ended in August, 3i's realisations stood at £129 million, down significantly from the £448 million figure reported in the same period last year.

Wilson stressed 3i’s figures did not reflect the £150 million in realisations the firm has made since 31 August. Since then 3i’s divestments of Inspicio – a provider of testing and inspection services, and Panreac – a Spanish manufacturer and supplier of chemicals for laboratory research,  have generated £121 million and £29 million respectively for the firm.

Likewise, the figures did not reflect 3i’s £23 million capital injection in Trescal, a French calibration services provider.

With those additional details added to the mix, “the level of investments and realisations has been broadly balanced from the beginning of the financial year”, said Wilson.

The group also noted a net debt increase to £450 million at the end of August, up from its year end level of £258 million due to “cashflows relating principally to investments and realisations, together with other operating expenses”, according to a statement.

3i has set a net debt limit of £1 billion, according to Wilson, who added the firm expects further increases in debt as follow-on investments are completed. 

Earlier this week 3i acquired Mizuho Investment Management, a debt management businesses, for £18.3 million as part of its overall restructuring plan. MIM will be merged with 3i’s existing debt management division to create 3i Debt Management, “a distinct business line” with approximately £4 billion total assets under management.

Wilson said the firm would primarily target European senior and subordinated corporate debt and was well positioned to capitalise on continuing turmoil and restructuring in the banking sector.

“For us the acquisition of high yield maturity portfolios have an additional benefit in that they provide a good source of stable income,” Wilson stated.

3i will announce results for the six months ending 30 September in mid-November.