City welcomes 3i's pounds 178m public offer: Venture capital group valued at dollars 1.58bn - Banks selling stakes will make profits up to pounds 360m

THE 3i float was given the thumbs-up by the City yesterday as the venture capital group announced it was offering 45 per cent of the company at 272p a share, and that institutions had oversubscribed the offer 2.2 times.

Analysts believe the price, valuing 3i at pounds 1.58bn, will also prove attractive to the private investors targeted by 3i. More than 385,000 people have registered for prospectuses in the pounds 177.9m public offer, which represents a quarter of the shares being sold.

The rest of the shares on offer have been firmly placed with institutions through a book-building exercise. The price is at a discount of 13.5 per cent to 3i's net asset value at 31 March of 314.4p.

The company was considering a discount of about 12 per cent compared with an average for venture capital investment trusts of 13-15 per cent. But choppy market conditions led to a last-minute decision to go for a more attractive price.

Analysts estimate the six banks, including the Bank of England, that are selling or reducing their stakes, will receive windfall profits totalling up to pounds 360m.

Royal Bank of Scotland, which is selling its entire 7 per cent stake through the offer later this month, will receive pounds 116m, giving an estimated profit of pounds 40m-pounds 50m.

Barclays and Midland are roughly halving their stakes and should receive profits of about pounds 80m each. NatWest is selling its 5 per cent stake and should get a profit of about pounds 40m. The Bank of England should get a profit of pounds 50m-pounds 70m by cutting its stake from 14.5 per cent to 6 per cent.

The seventh of 3i's founding banks, Bank of Scotland, is maintaining its 2.5 per cent holding.

The 140 employees who hold options for 3 per cent of 3i will also benefit, but most will be holding on to their shares.

3i's dividends for the year ended 31 March 1994 are equivalent to 6.54p per share, representing a gross dividend yield at the offer price of 3 per cent.

Brian Larcombe, 3i's finance director, rejected the charge that the recent stock market slide meant that the company's net asset value had fallen since 31 March, making the offer price less than a 10 per cent discount. Share prices may have fallen, he said, but earnings in the companies 3i had invested in had increased, and there had been some good realisations since that date.

Lewis Aaron, an investment trust analyst with SG Warburg, said: 'This is a very good price. It's very attractive to the retail investor.'

The shareholder banks have agreed with 3i not to sell their remaining stakes for 12 months without the agreement of 3i's advisers, Baring Brothers. The banks will also consult with each other if they wish to sell after that date.

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