Venture Capital – 3i forms trust to tap post-IPO potential

3i’s push into the technology sector continues apace. Following the launch of its $400 million Asian technology fund, its acquisition of Germany’s Technologieholding and the restructuring of BIL to form 3i Bioscience Investment Trust, the group has launched a GBP400 million ($632 million) trust to invest in quoted European technology companies.

3i European Technology Trust (3iET), which will be managed by 3i Asset Management, the group’s quoted fund management team, will target listed companies with a strong technology orientation in all sectors except biotechnology/life sciences – bases already covered by the Bioscience Investment Trust.

3iET will, subject to certain constraints, effectively have the right of first refusal on 3i investees moving to the public markets. During the past three years, there have been 27 flotations of companies that would fall within the trust’s remit out of the 3i portfolio. The trust may also seek to acquire shares in former 3i investees that have already attained quoted status. In all, stocks emanating from the 3i stable could constitute around half of 3iET’s portfolio. 3iET’s directors believe that this aspect of the trust will be particularly beneficial to investors in view of the aftermarket performance of recent 3i technology IPOs.

Paul Waller, the group’s director of fund management, describes 3iET as an excellent opportunity to leverage 3i’s skills in the technology field across Europe’ and adds: “3iET creates an opportunity to access listed technology companies at flotation and other listed technology companies in areas where 3i has expertise”.

With technology companies often now seeking to access the public markets at a relatively early stage of their development, the lines between unquoted and quoted investment management are less clearly defined than once they were. By launching 3iET, the group has developed a mechanism designed to capture optimal value from the post-IPO growth phase of such companies.

At the end of September, the 3i technology portfolio comprised holdings in more than 600 companies (including biotech ventures) acquired at a cost of more than GBP1.1 billion.

3iET was launched via a GBP380 million institutional placing and GBP20 million public offer sponsored by Merrill Lynch.