Bid alert at 3i as corporate raider plots shake-up

Britain’s oldest private-equity firm, 3i, went on bid alert today as it revealed that activist investor Edward Bramson’s Guernsey-based Sherborne Investors has built up a sizeable share stake since the start of the year.

Bramson, a Londoner who moved to New York in 1975, grabbed effective control of F&C Asset Management two years ago. He staged a boardroom coup after building up a 17% stake in the fund manager and took control without launching a full-scale takeover bid.

3i, which has a stock market value of £2.6 billion, is a far larger target than F&C but has already had recent run-ins with activist investors.

Last year Laxey Partners built up a small stake and demanded that 3i start selling down investments. But it withdrew its resolution at the annual meeting after veteran investment banker Simon Borrow was appointed chief executive. He immediately cut 190 jobs and closed some of 3i’s furthest-flung offices across Europe.

Today, 3i said it had discovered that Sherborne and its stockbroker Jefferies began trading in the private-equity firm’s shares on January 2. Shares were bought and sold by both parties with the resulting 1.6% stake on Jefferies books on 22 January. 3i, which is advised by Bank of America Merrill Lynch and Barclays, said the average price for its shares in those three weeks had been 239p which is considerably above its recent trading range.

Today the shares gained another 5.25p to 264.15p — a level they have not seen since August 2011. Bramson is still executive chairman of F&C Asset Management but will hand over the reins to new chief executive Richard Wilson at the annual meeting in mid-March.

The 3i campaign is understood to be led by Ian Brindle, a fellow Sherborne director and former chairman of PricewaterhouseCoopers. Brindle has joined Bramson on a number of UK companies which he has chaired after successful boardroom coups including Elementis, Spirent and 4imprint.

Last November Sherborne raised £207 million from investors saying it planned to invest in up to 30% of a UK company it considered undervalued. That would only secure it an 8% stake in 3i.

3i was formed in 1945 by the UK’s largest banks to provide capital for small and medium-sized companies. It became Investors In Industry and floated on the stock market in 1994.

It owns or has stakes in companies ranging from Agent Provocateur to coach holiday group Shearings.