3i and a top City rainmaker | FT Alphaville

3i and a top City rainmaker

Are we about to see some action at struggling private equity group 3i? Chairman Sir Adrian Montague must be hoping so.

Amid talk that several large shareholders are planning to abstain or vote against re-election of chief executive, Michael Queen at today’s AGM he’s moved to install a new high profile chief investment officer.

3i press release, Wednesday:

3i Group plc announces the appointment of Mr Simon Borrows as Chief Investment Officer. He will also be appointed to the Board when he joins the Company in the autumn.

Mr Borrows is currently Chairman of Greenhill & Co International LLP, having previously been Co-Chief Executive Officer of Greenhill & Co, Inc. Before founding the European operations of Greenhill & Co in 1998 he was the Managing Director of Baring Brothers International Limited. He is also a non-executive director of The British Land Company plc and of Inchcape plc.

Having successfully established the Chief Investment Officer role since his appointment to that post in 2009, Mr Ian Nolan will be moving to a new role in the autumn.

Borrows is, of course, one of London’s best known bankers and has been involved in many high profile deals such as the sale of EMI to Guy Hands’ Terra Firma.

It’s also worth noting that Greenhill is a long-standing adviser to 3i and Borrows was involved in the flotation of company in 1994.

So this is a PLC he knows lots about.

3i is currently trading at a significant 20 per cent discount to the estimate value of its investments. Unsurprisingly, it has come under pressure to launch a buyback to prop up its share price.

But Queen sees things differently. He thinks the cash could be better spent investing in news funds in India and China, according to weekend press reports.

Enter deal-maker Borrows and exit (stage left) the previous incumbent Ian Nolan, who has paid the price for the £201m hit 3i was forced to take on its investment in Enterprise, which maintains infrastructure on behalf of councils and utility groups.

Now, Borrows will certainly bring valuable perspective to 3i’s investment debates. He’s also, say analysts, a heavy hitter who will carry credibility within 3i and in the broader investment community.

Iain Scouller of Oriel Securities:

We view this as a significant appointment and a good move with some new senior management being appointed to 3i from outside. We also think that given Simon’s previous experience, he will be well suited to helping Michael Queen develop the business and able to take on senior management roles going forward.


We wonder if Burrows, who has deal-making in his DNA, might be a little more radical. Indeed, after 20-years at the sharp end of M&A we are more than a little surprised he’s taken this job. He doesn’t need the money and standing in the queue for a second tier CEO position just isn’t something he needs to do.

So why has he taken this role?

Well, the company is vulnerable to a bid as Scouller noted recently.

In our recent note entitled ‘Should 3i remain a listed company?’, we said that if 3i continues to trade on a sizeable discount, there must be a reasonable chance of a takeover approach. Suitors may be interested in acquiring a block of private equity assets and teams of experienced investment executives. Given 3i’s current share price and discount valuation, we think the chance of a takeover approach is rising. We believe any takeover interest in 3i Group could come from a number of sources including: 1) existing management & shareholders, 2) another private equity firm, or, 3) a generalist investor wanting expertise and a portfolio in private equity.

A management buy out, now there’s an idea. However, we need to see the details of Borrows’ remuneration package to understand what he’s being incentivised to do.

So far, however, the market seems impressed with the appointment and 3i’s results (also published today). At pixel time, the shares are down 3p at 289.1p.

Related links:
Interim Management Statement – 3i

3i hires top city banker to boost dealmaking – FT