Look out 3i - activist Bramson has his eyes on you...

Britain's oldest private equity group, 3i, is on bid alert after it emerged that activist investor Edward Bramson has acquired a significant stake in the business.

by Andrew Saunders
Last Updated: 05 Feb 2013

Bramson’s Guernsey-based fund Sherborne Investors is reckoned to have acquired a 1.6% stake in 3i since the beginning of the year. Bramson is perhaps best known for his cunningly staged boardroom coup at F&C two years ago, when he grabbed effective control after acquiring 17% of the business.

So it’s all rather uncomfortable for 3i bosses that his attention seems to have turned to them. But, with a market cap of £2.6bn it’s a much bigger target than F&C, Bramson might struggle to repeat his tactics. Sherbourne has around £200m to spend which would only buy it around 8%. But all the same, PE groups like 3i – which owns all or part of a wide range of firms from Shearings Holidays to Agent Provocateur - are more used to making bids than being potential targets themselves. Its share price has risen 5.25p on the news to 264.2, its highest level since August 2011

3i was founded in 1945, and as Investors in Industry (as it was once called) its role was to provide capital to mid-sized industrial firms which might otherwise struggle to fill the ‘equity gap’. It floated in 1994. 

This is not the firm’s first run in with activist shareholders either – last year Laxey Partners acquired a stake and began agitating for the group to sell down investments and return cash to its backers. But the appointment of Simon Borrows as 3i’s new chief executive seemed to kick that into the long grass.

But the timing of Bramson’s bid – if indeed that’s what it is – seems a little odd. Borrows hasn’t wasted any time getting to grips with 3i’s lacklustre performance, selling down, cutting 190 jobs and closing some of the group’s farther-flung offices, as well as pledging to cut debt and return more money to shareholders. So what’s he at?

Well, he could use his stake to elbow his way onto the board and push for even greater shareholder returns – all the things we expect from activist funds. But it’s also possible that he approves of Borrows' turnaround plan and is just looking for a safe place to stash his money while he looks for another, more bite-sized takeover opportunity.

Whatever the truth, his actions will probably have raised the temperature in 3i’s boardroom by a degree or two…

Picture: 'big fish eats little fish' BigStockPhoto

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