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Cash-strapped venture capital group 3i has confirmed plans to raise hundreds of million of pounds to strengthen its balance sheet. This is most likely to take the shape of a rights issue but it may also be forced to dispose of some of its better investments.
One disposal may be its 5.4% stake in Venture Production, 3p lighter at 794p, which is worth £65.6 million. Such a move could also trigger a full bid for the oil-exploration group, currently valued at more than a billion pounds.
British Gas operator Centrica already owns a 22% stake in Venture, which it bought for 725p a share back in March.
Whispers circulating the market place this afternoon claimed that Centrica, up 4¾p at 238¼p, might use the purchase of 3i's stake as a springboard for an offer of between 850p and 900p a share.
Stockbroker Evolution Securities has a buy rating and a 1320p target. But it warns that if a bid does not materialise, the shares are likely to drift lower. “The risk remains that the gap between Centrica's initial in-price and Venture's expectations remains wide and will frighten off potential white knights.”
3i also has a stake of 23 million shares, or 15%, in Salamander Energy, 1¼p firmer at 174¼p, worth just over £40 million.
Meanwhile, shares in 3i were beating a retreat, falling 54½p to 317¼p. That compares with their peak of more than 1200p two years ago, since when the investment group has lost its place as a constituent of the FTSE 100 index.
The firm has confirmed plans to raise between £500 million and £700 million, details of which are expected to accompany its full-year results early next month. The group has yet to talk about the move with its biggest shareholders. But they are expected to support the idea of a rights issue.
House brokers JPMorgan Cazenove and Merrill Lynch are already working on plans for a fully underwritten rights issue.
Stock-market bears were offered a breathing-space, but only just, as the FTSE 100 traded above its worst levels of the day after reducing the deficit to 7.74 to 4148.25.
The wider FTSE 250 saw its losses extended to 117.3 at 7252.3 although traders were quick to point out that second-liners have easily outperformed blue-chips in recent weeks and were overdue for a correction. Wall Street made a nervy start this afternoon with the Dow Jones losing 10.75 at 8065.54.
Utilities were being chased higher both for their defensive qualities and for underperforming the rest of the market of late.
Scottish and Southern Energy put on 37p at 1102p, National Grid 15½p at 550½p and water suppliers Pennon Group 8¼p at 430¾p and Severn Trent 20p at 1048p.
UBS has upgraded Cadbury, up 7p at 503p, from sell to neutral with a 490p target ahead of the confectioner's first-quarter trading update this week.
AIM-listed Plant Offshore firmed 0.6p to 2.25p after securing a £1.43 million contract with Malaysia's national oil company Petronas.
