3i to Use Balance Sheet as It Hunts for Deals in North America, Europe

3i Group may not have a new fund to invest, but the publicly traded investor will use its balance sheet to seek out deals in North America and Europe, says Ken Hanau, North America managing partner.

London-based 3i, which has £11 billion (US$17.1 billion) in assets under management, invests in private equity, infrastructure and debt management. 3i doesn’t have a U.S.-focused buyout fund and its last EuroFund closed at €5 billion (US$6.7 billion) in 2006. 3i had reportedly been expected to launch a combined growth capital and buyout “developed markets” fund that would cover Europe and North America this year. Simon Borrows, 3i’s CEO, told Financial News this week that the firm would look to develop managed accounts with key investors and won’t be fundraising for a traditional pool for the “foreseeable future.”

Without a new fund, 3i will use its balance sheet to seek out North American companies in industrial and business services, says Hanau. (3i targets the same sectors in Europe, plus healthcare and consumer.) In January, 3i said it had £1.2 billion in liquidity on its balance sheet as of Sept. 30, including £736 million cash and cash deposits and £495 million in undrawn committed facilities. 3i typically invests from US$50 million to $200 million equity per deal, he says.

“We’ve got plenty of capital and we’re open for business,” Hanau says.

On Tuesday, 3i announced it had agreed to sell Mold-Masters to CCMP in a deal valued at C$975 million (US$972.5 million). 3i is selling its 50% stake in Mold-Masters, Hanau says. The Gellert family, which founded the business in 1963, is also cashing out, Hanau says. The transaction is expected to close in April.

3i used its balance sheet to buy Mold-Masters in 2007 in a deal valued at C$540 million. Mold-Masters, of Georgetown, Canada, makes hot runner systems, temperature controllers and auxiliary equipment for the plastic industry. Sales for Mold-Masters grew to C$271 million in 2012 from C$168 million in 2009, 3i says. “Almost all was organic growth,” Hanau says.

The PE firm invested C$130 million in Mold-Masters between the purchase and follow-on investments, a source says. 3i, which went public in 1994 on the London Stock Exchange, is expected to make 2.1x its money with the sale. The exit is also expected to return C$350 million to the firm’s balance sheet, Hanau says.

3i initiated an auction process late last year for Mold-Masters. Robert W. Baird was lead advisor on the deal. It was joined by Morgan Stanley and Houlihan Lokey. Private equity firms such as Cinven, Warburg Pincus and KKR reportedly bid for Mold-Masters. Milacron, a CCMP portfolio company, emerged as the winner. “We’re excited about this combination and we think this is a great partnership,” Hanau says of the sale to Milacron.

Christopher McMahon of Baird advised on the process.

Photo courtesy of Mold-Masters