The boss of one of Britain’s top private equity firms faces an investor revolt after rejecting demands to return cash to shareholders.
Michael Queen, chief executive of 3i, also faces criticism about his proposed new pay deal, strategy, and the flagging share price.
Several of 3i’s top 10 shareholders, including Schroders, Black Rock and Scottish Widows Investment Partnership, are planning to abstain or vote against Queen’s re-election, according to market sources.
There is also expected to be a protest vote against the pay scheme, which has been attacked by investors because of confusion over the targets attached to Queen’s bonus plan.
The showdown comes after a series of meetings between investors and Sir Adrian Montague, the 3i chairman. Shareholders are up in arms over the company’s share price, which closed on Friday at 285Êp, an 18% discount to the value of its underlying investments.
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The firm has been under pressure to consider launching a share buyback scheme to prop up its stock price. Queen has rejected the move, arguing that the cash would be better spent investing in new funds in India and China.
Montague has attempted to defuse the tension with shareholders by promising to raise the issue of buybacks at a board meeting this week.
The protest against Queen’s re-election is not expected to be large enough to force him to quit, but it will raise the pressure on him to clarify his strategy.
3i was founded in 1945 as a government-backed investment fund targeting small businesses. Under the leadership of Queen’s predecessor, Philip Yea, it evolved into a global private equity giant.
The firm lurched into the financial downturn with too much debt, sparking a crisis that led to the exit of Yea two years ago. Queen, who had served as finance director, replaced him and launched an emergency £732m rights issue to shore up the balance sheet.
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The company has suffered several blow-ups in the past two years, writing off its investments in British Seafood, the fish importer, and Enterprise, the outsourcing group. Investors fear the hits could affect its ability to raise new funds.
Queen has tried to refocus 3i by combining its growth capital and buyout divisions, and targeting a steady 15% return from deals. The company declined to comment.