Bramson's Sherborne targets 3i with £200m 'turnaround' fund

Edward Bramson's Sherborne has executed a string of trades in 3i Group after raising just over £200 million to seed a fund targeting turnaround opportunities.

3i has taken the unusual step of alerting investors to the trades, stating 3i started to buy in on January 2 and in a series of follow up transactions bought and then sold additional 3i shares to Jefferies, the investment bank.

By January 15, Sherborne had acquired an interest of roughly 0.7% of 3i's total issued share capital, though since it has sold this on.

3i believes Jefferies has acquired additional 3i shares, and on 22 January estimated it owned around 1.6% of 3i's total issued share capital.

'The board notes that in November, an investment vehicle, Sherborne Investors (Guernsey) B Limited, which is managed by Sherborne Investors Management (Guernsey) LLC, raised gross proceeds of £207million with the stated objective of investing in a company which is publicly quoted, most likely on a UK stock exchange, and which it considers to be undervalued,' 3I said, drawing shareholders' attention to comments made about the vehicle, hinting it may be used to buy up to 30% of a single company.

Analysts at Oriel said it was unclear whether Sherborne would devote all £200 million to 3i, adding that at its current £2.5 billion market capitalisation this would represent 8% of 3i Group's shares.

'If Sherborne do take a sizeable stake, the next question is what is their aim? [Sherborne] do talk about investing in turnaround situations, and the "Borrows Plan" is being implemented with a substantial reduction in costs, repayment of debt and returns of capital to shareholders,' Oriel's Iain Scouller said.

3i is on track to sell investments this year and return between 15% and 20% of proceeds to investors once debt falls below £1 billion.

'It is certainly possible Sherborne and other shareholders could argue for a higher percentage of proceeds to be returned to shareholders,' Scouller added, arguing the investment company is a 'sell' because too much good news is priced in following 3i's recent 50% rally.