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3i mulls secondary play with £500m HBoS deal

The listed firm is expected to again team with Coller Capital to spin out a portfolio, but the potential transaction would see 3i become the manager of the assets in play rather than the seller.

3i’s growth capital team is expected to acquire a set of 45, mostly minority stakes in companies in a £500 million (€555 million; $758 million) deal backed by Coller Capital, according to sources familiar with the matter.

Should the potential purchase from Lloyds Banking Group come to fruition, it would further demonstrate 3i’s willingness to use the secondary market as an effective tool for both exits and acquisitions – a means that has yet to be fully embraced by many traditional private equity firms. London-listed 3i last year sold several portfolios of venture assets as it looked to boost its balance sheet and continue winding down its venture capital activities.

The most recent of these asset disposals saw the firm spin out around 30 investments to Encore Ventures, an affiliate of DFJ Esprit established to manage the portfolio with the backing of a £170 million fund from Coller and fellow secondaries giant HarbourVest Partners.

The Lloyds deal would see Coller again provide financial backing, however, 3i would manage the assets, according to an industry source.

Coller and 3i declined to comment on the Lloyds developments, first reported Sunday in UK newspaper The Times.

Last week, a similar private equity-secondaries syndicate – Bridgepoint backed by Lexington Partners – dropped out of the auction process. Bridgepoint established a team dedicated to looking after third party portfolios last year following its acquisition of Hermes’ direct investment arm and two associated funds’ portfolios.

Bridgepoint declined to comment while Lexington could not immediately be reached for comment.

The assets in play were originally acquired by Halifax Bank of Scotland’s (HBoS) integrated finance division, a unit that invested both debt and equity in companies. Its investments were later inherited by Lloyds when it agreed to purchase HBoS in September 2008. The assets – reportedly including stakes in yacht maker Sunseeker, Vue cinemas and the Caffè Nero coffee chain – had originally been put up for sale in November 2008, with UBS hired to lead the process. At the time, the portfolio comprised stakes in roughly 70 companies and had been valued at about £1.4 billion, including debt.