BRITAIN’S oldest private equity firm 3i is this week expected to announce plans to double its dividend in an attempt to appease investors concerned over its falling stock price.
The firm, which backs companies including the Early Learning Centre and Hobbs, the fashion retailer, announced in September that it would reveal changes to the annual dividend at the time of its half year results this Thursday.
Analysts expect the interim dividend to substantially increase, with some predicting the annual payout could rise to pre-2009 levels of 8p a share compared with 3.6p paid last year.
Chief executive Michael Queen has come under fire from investors, including Standard Life, Schroders, and Scottish Widows, who have been increasingly frustrated by the firm’s share price performance.
Shares in the FTSE 100 company have fallen 38p over the past year, closing at 195.8p on Friday, giving 3i a market value of £1.9bn.
“The shares are trading at quite a discount to the net asset value just now and we think a buy-back would be better value than a dividend increase,” one investor told City A.M.
Laxey Partners, an activist shareholder with a one per cent stake in 3i, has been calling for the firm to sell its 35 per cent holding in 3i infrastructure, a fund which Laxey says does not fit with the firm’s strategy.
“We were suggesting a distribution in specie of their holding in the infrastructure fund which would be much bigger than just receiving a slightly bigger dividend,” said Laxey’s co-founder co-founder Colin Kingsnorth.
3i declined to comment.