Equity group eyes up government assets

The listed private equity firm, which has done no new buyout deals for almost a year, is also looking to raise a new 884m (e1bn) growth capital fund to take minority stakes in companies and help them expand.

"Investing in joint ventures with governments in all European countries is an interesting area for us," Michael Queen said on the sidelines of a private equity conference in Berlin.

"We are looking at a range of things," he said, when asked if the firm was interested in bidding for some of the billions of pounds worth of assets expected to be put up for sale by the government to cut debt.

The Anglo-French Channel Tunnel rail link, the Dartford toll road crossing the River Thames, the port of Dover, the government's student-loan book and its stake in uranium processor Urenco are some of the assets Britain could sell.

The buyout industry is coming back to life after a year in the doldrums, as banks start lending for deals once more.

While 3i is hopeful of making a return to traditional private equity buyouts, the group also sees potential in providing growth capital for businesses.

3i has formally launched a private placement memorandum – documents for interested investors – for a new fund of around e1bn, Mr Queen said.

The group is hoping about half the money will come from third-party investors while the other half 3i will fund from its own balance sheet, he added.

The firm's e5bn buyout fund, raised towards the end of 2006 is about half spent.

Mr Queen declined to say which government assets the firm might look at. However, a joint venture approach by the group, which also has a listed infrastructure arm, 3i Infrastructure, would allow the authorities to benefit from future growth in the assets, and maximise returns when the partners finally sell or float the business, he said.

Prime Minister Gordon Brown's 16bn privatisation plan is mostly property-based.

But many of the other assets are seen as appealing to financial investors looking for steady, long-term cashflows in sectors that have high barriers to entry.

Mr Queen highlighted previous deals such as Keolis, a French light-rail company, which it co-owned with French state-owned rail operator SNCF as an example of a successful joint venture.

SNCF took back full control of the business after 3i had helped restructure and improve the business, Mr Queen said.