Borrows set to cut costs as 3i’s shake-up begins

THE new chief executive of buyout firm 3i has seen off a looming row with activist investor Laxey Partners with a series of cost-cutting measures that are likely to lead to the loss of 160 jobs.

City veteran Simon Borrows is set to announce plans to cut the staff by about 40 per cent and lead a shake-up of global operations when 3i holds its shareholder meeting this week.

The changes are not thought to be a response to Laxey’s longstanding calls for change but reflect Borrows’ mandate, agreed with the board, for measures to reduce costs and reverse the group’s share price decline and patchy investment record.

Now hedge fund Laxey has dropped the motion it planned for Friday’s annual general meeting.

Borrows, pictured, has been in contact with Colin Kingsnorth, chairman of Laxey, since taking over at 3i but the pair are not thought to have met.

Borrows, a former investment banker who joined 3i as chief investment officer in October, last month replaced Michael Queen, who had resisted pressure for a share buyback. Borrows has a longstanding knowledge of 3i, having advised on the firm’s initial public offering in 1994.

Now Britain’s oldest private equity house, which owns stakes in architecture firm Foster + Partners and lingerie chain Agent Provocateur, is expected to cut the size of its operations in Singapore following Borrows’ review of its operations.

3i staff are due to be briefed at a meeting on Thursday evening.

Last month Borrows hinted at his strategy when he noted that many of the firm’s “challenged investments” came out of offices in Britain and Spain. The firm’s global footprint will be “more focused and a lot leaner”, he said at the time, although he re-affirmed his faith in its operations in the emerging markets of India and Brazil.

Laxey, which has a stake of about one per cent, has effectively withdrawn its resolution because it knows other 3i shareholders want to give Borrows time to turn around the business.

Shares in the firm have lost more than 80 per cent of their value over the past five years. On Friday the stock closed up 1.47 per cent at 182.74p.

3i declined to comment.

Kingsnorth said: “Laxey has abstained from its resolutions from next week’s AGM because they (3i directors) have come up with a scheme in response, appointed Simon Borrows and will announce a strategic review.”

Laxey is well-known for its activist approach to investing and has previously become embroiled in long-running public disagreements with Alliance Trust, Katherine Garrett-Cox’s investment trust.

Kingsnorth once said that activism is “really good and useful, as long as it’s done properly” and a “real pain in the backside” if it is done wrongly.