3i intends to invest $300M in 2010

Britain’s 3i Group Plc announced last week that it expects to invest up to a combined $300 million in about three deals in China next year as it moves to regain momentum after making no investments in 2009.

“We hope to invest in two to three deals per year and will obviously look to maintain that pace,” Anna Cheung, 3i partner and co-head for China, told Reuters.

In December 2008, 3i relocated its China partners to its Beijing office from Hong Kong and Shanghai as part of a global plan to improve cost efficiency and to increase focus on China deals. Cheung said 3i’s typical investment in China deals ranged from $30 million to $100 million, with a sweet spot between $50 million and $70 million.

“Historically we have been a little bit lower. We have been moving up, but I think we’re just moving with the market.”

3i, one of the world’s few publicly traded private equity firms, has invested $250 million with 13 deals in China since it began operating there nine years ago. Previous investments include digital advertising company Focus Media and Chinese hot-pot restaurant chain Little Sheep.

In March, 3i recorded a return of three times its investment from the sale of its 11.32% stake in Little Sheep, according to a source with direct knowledge of the deal.

3i’s investment in PCD Stores, which listed on the Hong Kong stock exchange this month, has earned the company a return of 2.2x its initial investment of $31 million in 2005. It sold its stake, representing almost 10% of the company prior to the IPO, for $65 million.

3i’s China current portfolio consists of four companies—John Hardy, Joyon Real Estate, Futaste and D.Phone.

D.Phone, a retailer of mobile phones in China was the “most ready” and “probably getting close” to the stage where it would be ready to list on an exchange, Cheung said. However she declined to say whether it would go public next year.

Cheung said sectors of focus for 3i include consumer, alternative energy and oil and gas, industrials and business services. —Farah Master and Donny Kwok, Reuters