FTSE 100-listed 3i has done two growth capital deals.
3i has bought a 27 percent stake in insurance group Hyperion for £50 million ($99.1 million; €63.5 million), valuing the business at more than £120 million.
Separately the investment firm has sold its 25 percent stake in Senoble, the third largest French producer of yoghurts, dairy products and chilled desserts, for an undisclosed sum to its founders.
The group’s finance director Simon Ball said during its pre-results statement, growth capital is the area where the investment firm sees the most opportunities in present market conditions.
The firm’s growth capital business made up 44.7 percent of its investment, or £960 million in the 11 months to 29 February 2008. This was up from £432 million in the same period the previous year.
3i’s investment in Hyperion gives it exposure to a company which has grown annually at approximately 40 percent since inception in 1994. The company specialises in directors & officers and public indemnity insurance.
Gordon Hague, a director at 3i, said: “[These two areas of insurance] are growing much faster than the wider market.” The business provides this insurance to small businesses like hedge funds, private equity and architects' practices, he said.
3i was attracted by Hyperion’s use of a broking business and an underwriting business. “The broking business and the underwriting business lead to a hedge because an insurance market hardens when there are big losses,” Hague said. Insurance premiums vary in conjunction with the market, and so in the event of a difficult year leading to numerous claims the underwriting business’ profits will be hit, but this in turn allows the broking business to charge higher premiums and its profits to increase.
The company’s business is divided by two thirds in mature markets to one third in emerging markets, but Hague said much of its growth is driven by new business in country's like Mexico, India, Brazil and Dubai.
This has diluted the holdings of Aim-listed financial services private equity firm BP Marsh and Spanish firm Murofo Investments, long-term backers of the company.
BP Marsh’s holding has now decreased from 28 percent to 20 percent and the deal has revalued its stake at double the £12 million stated in its accounts to the end of January 2008.
The Senoble family has also bought 3i’s stake in its dairy products business, which doubled in size during 3i’s four year ownership, to return its ownership to 100 percent.
Turnover almost doubled from €630 million to more than €1.1 billion at Senoble during 3i’s ownership.
The firm has made four acquisitions outside France, including cake maker Elisabeth The Chef. The group has a tie-up with diet company Weight Watchers, for which it produces its dairy products such as low calorie yoghurts and desserts.