3i Group Plc (III), Britain’s oldest private-equity investor, may cut at least 160 jobs, about 40 percent of its employees, in an overhaul to revive profit, according to a person with direct knowledge of the plans.
Chief Executive Officer Simon Borrows, who replaced Michael Queen last month, may also tell shareholders at the company’s annual general meeting in London next week that 3i will shrink its operations in Singapore, the firm’s first office in Asia, said three people with knowledge of the plans, who asked not to be identified because a decision hasn’t been formally made.
“This would be a drastic scale-back,” said Iain Scouller, an analyst at Oriel Securities Ltd. in London, who met with Borrows last week and expected a 20 percent job reduction. “Borrows is moving more quickly than anticipated, with a blank sheet of paper. There are no sacred cows.”
Borrows, 53, who was hired as chief investment officer in October from New York-based Greenhill & Co., said he will outline a plan for London-based 3i at the shareholders meeting on June 29 to improve profitability and deal-making after the firm’s shares plunged 80 percent in five years. 3i posted a 425 million-pound ($663 million) loss for the year ended March 2012.
“Nothing will be decided until next week, when the board meets before the AGM,” Patrick Dunne, a 3i spokesman, said by telephone. The company later issued a statement saying it would have no comment, though would provide a full update at the investor meeting.
The stock climbed 2.2 percent in London trading to 184 pence for a market value of about 1.8 billion pounds.
A month-long strategic review by Borrows may result in a leaner firm, focusing on smaller transactions in fewer countries and distributing more dividends, Scouller said.
Singapore, opened in 1997, was 3i’s first office in Asia. The firm is also considering focusing on its Beijing office in China, the people said. 3i has smaller offices in Hong Kong and Shanghai.
Started just after World War II, 3i was one of the first private-equity firms in Europe, establishing a network of offices on the continent in the 1980s and focusing on medium- sized companies. After going public in London in 1994, it expanded in Asia and targeted bigger transactions. It raised a 5 billion-euro ($6.3 billion) buyout fund in 2006, its largest.
The 2008 credit crisis halted the firm’s expansion. Queen replaced Philip Yea in January 2009 and raised 700 million pounds five months later to cut debt after the value of the firm’s assets dropped by half. Queen cut jobs, combined the leveraged buyout team with its growth capital unit, opened an office in Brazil and added employees in China. He also bought Mizuho Investment Management U.K. Ltd. to expand the firm’s businesses in debt management. The firm’s debt declined to 1.6 billion pounds as the end of March from more than 2.5 billion pounds in 2009.
Queen last July rejected shareholder demands to use some of the firm’s 1.9 billion pounds in cash to buy back shares. He announced his departure in March. Two months later, the firm reported a 21 percent drop in net asset value for the year ended March 31, and Borrows said the firm would more than double the dividend and return 15 percent to 20 percent of the profit from any asset sales.
At next week’s shareholder meeting, hedge fund Laxey Partners Ltd., which owns 1 percent of 3i, plans to call on the firm to stop investing and return cash to boost the share price. Pensions Investment Research Consultants Ltd., a London-based corporate-governance consultant that advises shareholders on their votes, is opposing Borrows’s hiring bonus, equivalent to 200 percent of his base salary.
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