UPDATE 3-3i plans new investments and extra shareholder payout

Thu Jul 18, 2013 10:51am EDT

* Met target of reducing gross debt below 1 bln pounds

* Plans to distribute more of returns to shareholders

* Pick-up in investment opportunities in US, northern Europe

By Kylie MacLellan

LONDON, July 18 (Reuters) - British private equity group 3i is boosting payouts to shareholders after selling off a string of assets and said on Thursday it had seen a pick-up in new investment opportunities.

3i, owner of women's fashion chain Hobbs and Tommee Tippee baby bottle maker Mayborn, has spent the last year restructuring after shareholders criticised its poor share price performance and weak results from its buyout business.

The company said it had completed or announced 443 million pounds ($672.2 million) of divestments, known as realisations, in the three months to June 30, including the sale of UK software provider Civica to OMERS Private Equity in May.

Having achieved its target of getting gross debt below 1 billion pounds by June and gearing below 20 percent, 3i said it planned to distribute between 15 and 20 percent of gross proceeds from its divestments to shareholders.

"We hope the number could be quite large," chief executive Simon Borrows told shareholders at the company's annual general meeting in London on Thursday.

Borrows, a former investment banker who was previously 3i's investment head, replaced Michael Queen last year with a remit to turn around a business left struggling after a series of poor deals in recession-hit European markets.

On Thursday 3i said it so far had 665 million pounds available to distribute, which included money raised from the sale of plastic equipment maker Mold-Masters in February.

That would be enough to support a total 2014 dividend of between 10.5 pence and 14 pence per share, Bank of America Merrill Lynch analyst Philip Middleton said in a note. This year the company agreed a full year dividend of 8.1 pence per share.

"We will see significant realisations going on into the medium term so we would expect this policy (of distributions) to hold. 3i will become something more of a yield stock than it has been in recent times," Borrows said.

Whether the amount paid out is closer to 15 or 20 percent will depend on how much 3i spends on new investments, he said.

"We have started to see a pick-up in interesting investment opportunities ... particularly in the United States and more recently in Northern Europe," Borrows said, adding the company was targeting around 500 million pounds of mid-cap private equity investment annually.

Finance Director Julia Wilson told reporters 3i was particularly looking at U.S. businesses with a European angle, and countries and sectors in which it had a good previous track record such as Germany, and industrials.

Middleton welcomed the prospect of new investments for 3i.

"This remains the key piece of unfinished business for the company," he said.

Shares in 3i, which have risen more than 70 percent since the start of the year, were down 1.15 percent at 377 pence by 1314 GMT.

The company, which has been moving away from just private equity and aiming to balance this better with its infrastructure and debt-management businesses, said net asset value grew 5 percent to 326 pence per share in the last three months.

"It has been a very good period of recovery for 3i after too many disappointing ones," said Borrows.

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