3i sambas out of Brazil market in concerns over economic growth

 
Michael Bow
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THE UK’S oldest private equity group has quit Brazil due to the Latin American country’s deteriorating economic promise.

3i Group, formed in 1945, said it will stop investing in the country and cease raising a Brazilian-focused fund due to slowing economic growth. Its Sao Paulo office, which contains eight staff, is also set to close.

Once the darling of the investment community, Brazil has been given the cold shoulder recently due to downgrades on GDP growth estimates from 3.8 per cent to 1.9 per cent for this year.

3i currently has two investments in the country, sunglasses maker Oticas Carol and cable TV provider Blue Interactive – worth £34m or one per cent of the firm’s assets.

Overall, 3i said it was buying more companies than at the same point last year, spending £247m in the three months ending December compared to £4m last year.

3i said it did not expect to do any more deals over this quarter which ends in March.

Boss Simon Borrows said: “This was a very important quarter for 3i. We returned to a good level of investment activity, completing four major investments in our private equity business.”

HOBBS COSTS PRIVATE EQUITY OWNER £14M

3i denied reports yesterday that it is looking to sell Hobbs after taking a huge write-down in the value of its investment in the fashion group, blaming poor sales over Christmas.

The company bought into Hobbs in 2004 from Barclays Private Equity for £111m, yet has seen the value fall. It was forced to write down the value by a further £14m yesterday “due to trading weakness in the last quarter of 2013”.

That means 3i’s 47 per cent stake in Hobbs is now worth around £21m, down 40 per cent from the £35m valuation given at the time of its half-year results in September.

A spokesperson for 3i said: “We are not intending to sell it at the moment at all. We have no time pressures to sell it and we will continue to work with management to grow the company.”

The upmarket fashion retailer, founded 30 years ago, has been investing in revamping its UK stores and has also stepped up its expansion overseas, with shops planned for China and Hong Kong.

It has not provided a Christmas trading update but the statement from 3i suggests Hobbs has, like many of its peers, been a victim of the aggressive and early discounting seen on the high street in the run-up to Christmas.

Hobbs last reported an 11.1 per cent increase in sales to £125.1m in the year to 27 January 2013, and earnings of £15.2m.

Earlier this month the group announced that it has appointed former New Look chairman and chief executive Phil Wrigley as chairman, replacing Iain MacRitchie.