3i bides time in crowded buyout space

INFRASTRUCTURE investor 3i warned yesterday that competition from rival private equity groups would make asset prices more expensive this year as it looks to make acquisitions.

The listed buyout house, which also focuses on growth capital, said it saw “high quality opportunities” for purchases but insisted it would take a cautious approach given recent bidding wars for companies such as Pets at Home, the retailer, and Sebia, the diagnostics business.

Speaking as the private equity group unveiled strong year-end results yesterday, chief executive Michael Queen said: “We expect [an] overhang of [private equity] capital to be around for the next 18 months or so, so it’s a pretty competitive market out there.”

Shares in 3i rose 7.6 per cent to 288.7p after the venture capital titan upgraded the value of its portfolio by 15 per cent to 321p per share – the upper end of City forecasts – on the back of buoyant equity markets. The company delivered a total return of 16.2 per cent to shareholders after a rough ride in 2009 saw it record a loss of 53 per cent. Despite writedowns on portfolio companies such as fresh fish supplier British Seafoods and Ultralase, the laser eye surgery clinic, 3i managed to raise £1.4bn from selling several investments at a 19 per cent average profit.

Net debt, a much-watched figure since the group raised £732m last year to repair its balance sheet, was down to £258m, below the £300m analysts had hoped for.

James Glass at Numis Securities said: “3i has come a long way over the past 12 months and is now in a position to exploit new opportunities.”