3i considers £300m cash return to shareholders

The venture capital group 3i announced yesterday it will return cash to shareholders after realising £1.15bn from investments.

The venture capital group 3i announced yesterday it will return cash to shareholders after realising £1.15bn from investments.

Analysts said the company could return between £200m to £300m this year, and possibly a further £100m to £250m in the next couple of years.

The London-based group declined to release further details, but promised a full announcement when it publishes annual results on 12 May.

The group has yet to decide on the most suitable method of returning cash, which could take the form of share buy-backs, redeemable shares or a special dividend, and will consult shareholders on their preferences.

Philip Yea, the chief executive, who joined 3i in July, is making his mark on the company which started life as a post-war government industry investment scheme in 1945. Under his leadership, 3i has become more international, increasing its business in the Far East. Almost half the business is outside the UK, and the group has recently expanded into India. 3i has also shifted its focus from investing in small, emerging businesses to making large investments in established companies.

The FTSE 100 company, Europe's largest listed private equity group, has enjoyed strong cash inflow after it accelerated its rate of realisation while remaining picky about new investments.

Investments totalled £843m in the 11 months to the end of February, up from £843m a year earlier. Realisation proceeds climbed to £1.15bn from £807m, buoyed by the sale of large buyout investments such as Westminster Healthcare and Pets at Home. There were 12 flotations during the 11 months.

Michael Queen, the outgoing finance director, said the rising valuations of buyouts had made 3i focus more on divestments than acquisitions. "We are seeing very good prices for the asset sales and we're being selective about the assets we buy, particularly in the buyout area, because of the high prices," he said. "We are net sellers." He will hand over his post to Simon Ball on 1 April, and will assume responsibility for 3i's growth capital business.

The group predicted provisions for investments which may fail would be lower this fiscal year. Iain Scouller, at UBS, said if 3i continues to realise investments at a greater rate than it makes new investments, it could return yet more cash to shareholders.