The private equity business 3i Group is to offer investors a stake in an infrastructure fund that will take a separate London listing and is seeking to raise as much as £1.3bn.
The company will commit at least £325m to the fund, mainly in the form of its existing infrastructure investments, in return for shares in the vehicle. These include the water company AWG, formerly known as Anglian Water, and its investments in PFI projects - including Norfolk and Norwich Hospital.
The fund plans to raise between £700m and £1.3bn, giving 3i a shareholding of 25 per cent at the upper end of that range.
3i Infrastructure Ltd will take equity investments in entities owning infrastructure businesses and assets, in Europe, North America and Asia. It is aiming to make a total annual return of 12 per cent and to invest the money it raises in the two years after listing. The fund will make investments ranging from taking listed companies private, through to buying stakes in a single PFI project.
3i will manage the fund and thereby benefit from advisory and performance fees from it, in line with group strategy to grow third party fee income.
Michael Queen, head of infrastructure at 3i Investments, said: "The launch of a dedicated infrastructure investment company is a natural progression for 3i which has been investing in infrastructure for the past 20 years. We believe infrastructure is an attractive asset class with the potential for long-term predictable returns."
The model of the fund provides a "permanent capital" vehicle, which is suited to infrastructure schemes that typically need long- term backing - whereas investors can sell out of the listed shares of 3i Infrastructure, that would not take money out of the fund itself. Infrastructure is long-term by nature, so it is attractive to pension funds, which have long -term liabilities.
Bill Barnard, an analyst at investment bank, Dresdner Kleinwort, said: "We see this as a necessary step in 3i's development of its Infrastructure product line as such a co-investment vehicle is needed to ensure that the lower return/lower volatility Infrastructure product does not dilute its own balance sheet returns from private equity investing."
Separately, 3i Group is understood to be considering making counter-bid for estate agency chain Countrywide, which admitted this week it had received an approach. Last month, 3i's own £950m bid for the company was defeated by Countrywide shareholders, but the emergence of another potential buyer means that it is looking at mounting another offer.Reuse content