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3i Says Purchases, Asset Sales Slumped in ‘Subdued’ Markets

3i Group Plc, Britain’s oldest private-equity firm, said the pace of new investments and asset sales slumped by more than half in the six months through September amid “subdued” markets for mergers and acquisitions.

The firm spent 138 million pounds ($219 million) compared with 448 million pounds in the same period a year earlier, London-based 3i said in a statement today. Asset sales, or so-called realizations, fell to 268 million pounds from 532 million pounds, the company said.

The mergers and acquisitions market has been very “quiet,” Chief Executive Officer Simon Borrows told reporters on a conference call today. The company has “stayed cautious” about making new investments in Europe, he added.

Borrows, who was named chief executive officer in May after shareholders urged the company to stop making deals and instead return money to investors, is cutting a third of 3i’s workforce and closing offices in Asia to reduce annual costs by 45 million pounds by April 2014. The firm said today it has suspended new private equity investments in Asia and Spain and is “on track” to meet its cost and debt-reduction targets.

“We have wasted no time in implementing the significant organizational and cultural changes that are needed,” Borrows said. “There is much more to do and we will continue to work hard to drive improved performance across our business.”

Net Assets

3i slipped 0.1 percent to 209.4 pence in London trading. The stock has climbed 16 percent this year, valuing the company at 2 about billion pounds.

Net asset value fell to 273 pence a share at the end of September from 279 pence a share at the end of March. Net debt fell to 493 million pounds from 531 million pounds.

3i initiated a review of employee pay this year to ensure that compensation better reflects the company’s performance, Borrows said today. Compensation accounts for about 60 percent of 3i’s annual operating costs, according to the statement.

Likely changes will include requiring that deferred shares make up a bigger portion of pay for senior management so they start behaving more like shareholders and greater variability between the compensation of top earners and the lowest paid employees, Borrows said. 3i will meet investors next year to solicit their views and plans to make changes in 2013, he said.

Since announcing its cost-reduction plans in June, 3i has reduced headcount by 104 employees and closed offices in Barcelona, Copenhagen, Hong Kong, Milan and Shanghai, according to the statement.

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