3i confirms £732m rights issue; sells European investments to Cipio

At 3i's recent press conference, the firm's CEO Michael Queen confirmed plans to raise £732m in a rights issue that would optimise the value of its current portfolio, reduce debt and strengthen the company's "perceived weak position" in the market.

3i said that it would issue 542 million new shares at a price of 135 pence per share, a 39.8% discount to the theoretical ex-rights price and a 60% discount from Thursday's closing price of 339 pence. The move is expected to strengthen the company's investment grade credit rating as well as improve 3i's access to debt capital markets.

The group reported net debts of £1.1bn at the end of March and a net asset value per share of 496 pence, down from 1,077 pence one year ago. 3i also revealed a loss of £2.15bn against a profit of £792m last year.

Queen said that this issue would be the start of a more conservative approach to its financial strategy, adding that the rights issue would increase liquidity to £1.8bn - up from £1bn. He was quoted as saying that 3i is in "no Candover situation", and that the "offers given on its assets were ridiculous".

At the same time, the private equity group has agreed to sell 10 European investments to secondary direct investment firm Cipio Partners. The investments are part of 3i's European venture portfolio and comprise late-stage venture investments in information technology, internet media and cleantech businesses.

Cipio cited its ability to rapidly execute transactions with large asset pools, as well as its track record with vendors and portfolio companies in the past as important factors to clinch the deal. The transaction reflects how a growing number of private equity firms sell their stakes on the secondary market, which many industry players assume will only increase over the coming months.

3i Group refocused its strategy away from venture capital to growth capital investment in early 2008. Cipio was advised by Skadden Arps Slate Meagher & Flom, while 3i Group was advised by Mummert & Company Corporate Finance and CMS Hasche Sigle.

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