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* Expects to exceed cost-cutting targets for year
* Asset values rise 4.8 percent in three months to Dec. 31
* On track to cut gross debt below 1 bln stg by June
By Kylie MacLellan
LONDON, Jan 31 (Reuters) - British private equity group 3i is to focus on further asset disposals over the comingmonths, saying that it intends to build on strong progress madein its efforts to restructure the business.
Since shareholder frustration at poor share priceperformance and weak results from its buyout business forced achange in chief executive last year, the owner of women'sfashion retailer Hobbs and Tommee Tippee baby bottle makerMayborn has been on a drive to reboot its flagging fortunes.
Former banker Simon Borrows, who spent his first six monthsin charge cutting jobs and closing offices as the companyretrenched to its northern European roots, said he expects 3i toexceed its cost-cutting targets for the financial year.
"We are well into the first phase of restructuring at 3i andhave made strong and measurable progress," he said in Thursday'sthird-quarter statement.
The company said that net asset value (NAV) grew 4.8 percentto 286 pence a share in the three months to Dec. 31, reducing to283 pence after paying its interim dividend this month.
Gross debt, which stood at 1.2 billion pounds ($1.9 billion)at Dec. 31, is on track to fall below 1 billion pounds by June,the company said.
This week 3i revealed that activist investor EdwardBramson's Sherborne Investors and its broker Jefferies had beenbuying shares in the company.
In a call with reporters, Finance Director Julia Wilsondeclined to comment further on Bramson, who has a history oftaking on the managements of businesses he considers to beunderperforming. Wilson would only say that 3i had not had anycommunication with Bramson or Sherborne.
DISPOSAL PLANS
Oriel Securities analyst Iain Scouller thinks thatSherborne's interest in 3i could prove to be short-lived.
"In the past Sherborne abandoned potential investments afterprices of targets rose. We think this must be a possibility inthe 3i situation, given their initial activity appeared to bebelow the 230 pence price level," he said.
Shares in 3i, which have risen by about 47 percent sinceBorrows took over, fell 2.4 percent to 266 pence by 1015 GMT.
The company said that private equity investment disposals,which it describes as "realisations", generated 210 millionpounds in the nine months to Dec. 31. That compared with 93million pounds of new investments in the period.
"Over the past six months, in addition to implementing thereorganisation and cost-reduction programme, we have been busypreparing for realisations within private equity," Borrows said.
"We expect to see the benefits of this coming through overthe next 18 months, with a number of key realisations as well asan increasing level of investment activity."
3i, which was set up after the Second World War to help withthe reconstruction of British industry, sold its remaining stakein German engineering group Norma last month.
At the time, a source familiar with the situation said thecompany was preparing to sell more companies, including Canadianmanufacturer Mold Masters, UK software maker Civica andGerman-Danish ferry operator Scandlines, over the next fewmonths.
"From here, we believe the story will be about NAV growthand capital returns; hence we believe the market will likelyfocus heavily on disposals," Barclays analysts said in a noteon Thursday.
"We expect a strong pick-up (in realisation activity) frombusinesses being prepared for divestment."
