News of the possible disposal caused 3i's shares to slip 15p to 452p. It leaves only Barclays and the Bank of Scotland of the original backers still holding shares in the group, which was founded in 1945 to fill a funding gap for small businesses.
NatWest said any sale, which would be subject to market conditions, would take place after 3i announced its annual results on 6 June. Through holdings inherited from its constituent banks, NatWest has been the largest shareholder for a large part of 3i's existence.
Despite the fall in its share price yesterday, 3i put a brave face on the decision. Brian Larcombe, finance director, said: "We welcome the proposal and we believe it will enhance liquidity. The feedback we have had from a number of brokers is that liquidity could be improved and this move would be genuinely helpful."
However, analysts were divided on the merits of the sale. One said: "This gives NatWest an opportunity to sell the shares without having as much of an impact on the share price." He said it was unlikely that NatWest would sell all of its current holding. "Any client that's done as well as NatWest have in these shares would be quite reluctant to sell them all." he said. "I'd be surprised if they didn't keep 5 per cent".
But other observers suggested that 3i's share price could suffer as a result of the potential overhang of the stake being put up for sale. One analyst said: "Our view is that the shares were too high. Someone was going to sell but any significant discount to the market is an opportunity for people to pick them up. Good figures, a good economy and an improving backdrop for small companies is an opportunity to sell."
The divestment will take the form of a secondary market transaction and will be aimed primarily at institutional investors, NatWest said. But in an attempt to prevent potential buyers depressing the price by selling shares in advance of the offering, the banking group warned that the 3i share register and market was now being monitored by NatWest Securities and de Zoete & Bevan, brokers to any sale. Net purchasers of 3i shares between now and the sale will be favoured in the allocation of shares, NatWest said. Private investors will be able to apply for shares through financial intermediaries.
Several banks took the opportunity to sell at the time of 3i's's flotation in July 1994 and most of them left the share register in a secondary offering in June last year.