3i shareholders see grim future

3i boss Michael Queen may have given his notice to quit the buyout firm – but investors still do not like what they see at the embattled business.

The share price is 3.2p up at 217.2p in a strong day on the market. However, it has lost almost a quarter of its value over the last year.

And analysts add that the value of the firm’s investments, its net asset value, is worth 290p a share – higher than its share price.

Queen, who is a 25-year veteran at the group and was at the helm for three years, inherited a firm that had run up big debts through a combination of a run of poor investments and sizeable investor payouts. Queen was able to cut costs but could not build the firm’s portfolio.

Last Thursday he declared his intention to leave 3i, which includes architect Foster + Partners and Agent Provocateur among its investments, once a successor is found.

But the very next day the firm received a letter from activist hedge fund Laxey Partners, which owns 0.9pc of 3i, saying the buyout group should sell its investments and return the proceeds to investors ‘until such time as the [shares] cease to trade at a discount to their underlying asset value.’

Laxey said it will submit resolutions at 3i’s annual meeting in July calling for the firm to formally adopt this course.

Other investors go further saying that 3i, which has its roots in the 1945 Labour government’s investment policy, should consider liquidation and sell off all of its assets. Large shareholders such as Blackrock and Schroders are also understood to be unhappy with the pace of progress at the group.

Analysts at Jpmorgan said Laxey’s call is ‘well-timed’. The broker added that ‘a managed liquidation strategy is being pursued by other listed private equity companies with a better record than 3i such as Candover, Conversus and LMS’. Analysts at Oriel Securities add that even though 3i should survive calls for its break up, the business will come under intense pressure to sell its 35pc holding in 3i Infrastructure, which in total is valued at around £360m.

3i chairman Sir Adrian Montague said he will ‘think hard’ about what Laxey and other shareholders say. He will also lead the search for a new chief executive.

Over the coming months 3i’s management will come under intense pressure to explain why the business as a whole is worth more than the sum of its parts.

The FTSE 100 leapt 106.44 points to 5,874.89, its biggest daily rise in two months as manufacturing data from the world’s two biggest economies eased concerns over sluggish worldwide growth.

In New York the Dow Jones Industrial Average rose 52.45 points, to 13,264.50, after factory output in the US expanded at a faster pace than forecast in March. The Institute for Supply Management’s factory index rose to 53.4 in March from 52.4 a month earlier. Fifty is the dividing line between growth and contraction.

In China factories were surprisingly busy in March, with the country’s official Purchasing Managers’ Index jumping to an 11-month high of 53.1 in March, up from February’s 51 comfortably beating forecasts of 50.5

Back in London this data sparked gains for resource stocks like miners.

Fresnillo took on 66p to 1664p, BHP Billiton added 57.5p, to 1965p, and Rio Tinto gained 110p, or 3.2pc, to 3556p.

Even African-based gold miner Randgold Resources joined in on the rally, adding 50p to 5420p despite the fact that Mali, where it has some key mines, is bracing itself for possible sanctions after a military coup.

Nomura, cut its recommendation on Randgold to ‘neutral’ from ‘buy’ added that sanctions on Mali could hit full-year 2012 substantially. Industrial group Cookson Group jumped up 41.5p to 732.5p as investors welcomed reports that it is mulling a split between its ceramics and electronics divisions, which could see its valuable electronics arm that makes parts for devices like Apple’s ipad, gain value.

Aim-listed Mwana Africa jumped 0.68p to 5.7p after it said it planned to raise £22m to restart its Zimbabwe-based nickel project and other projects in the Democratic of Congo (DRC). Mwana Africa said it will raise the cash via funding from China International Mining Group investment house and a share sale.

Igas rose 0.75p to 47.25p after the British shale gas company more than doubled its estimate of gas in place at its Doe Green site in Warrington and fields around the north-west England and started a search for an experienced partner after being approached by various companies. The firm now says the sites hold up to 4.6 trillion cubic feet of shale gas.