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* Met target of reducing gross debt below 1 bln pounds
* Plans to distribute more of returns to shareholders
* Pick-up in investment opportunities in US, northern Europe
By Kylie MacLellan
LONDON, July 18 (Reuters) - British private equity group 3i is boosting payouts to shareholders after selling off astring of assets and said on Thursday it had seen a pick-up innew investment opportunities.
3i, owner of women's fashion chain Hobbs and Tommee Tippeebaby bottle maker Mayborn, has spent the last year restructuringafter shareholders criticised its poor share price performanceand weak results from its buyout business.
The company said it had completed or announced 443 millionpounds ($672.2 million) of divestments, known as realisations,in the three months to June 30, including the sale of UKsoftware provider Civica to OMERS Private Equity in May.
Having achieved its target of getting gross debt below 1billion pounds by June and gearing below 20 percent, 3i said itplanned to distribute between 15 and 20 percent of grossproceeds from its divestments to shareholders.
"We hope the number could be quite large," chief executiveSimon Borrows told shareholders at the company's annual generalmeeting in London on Thursday.
Borrows, a former investment banker who was previously 3i'sinvestment head, replaced Michael Queen last year with a remitto turn around a business left struggling after a series of poordeals in recession-hit European markets.
On Thursday 3i said it so far had 665 million poundsavailable to distribute, which included money raised from thesale of plastic equipment maker Mold-Masters in February.
That would be enough to support a total 2014 dividend ofbetween 10.5 pence and 14 pence per share, Bank of AmericaMerrill Lynch analyst Philip Middleton said in a note. This yearthe company agreed a full year dividend of 8.1 pence per share.
"We will see significant realisations going on into themedium term so we would expect this policy (of distributions) tohold. 3i will become something more of a yield stock than it hasbeen in recent times," Borrows said.
Whether the amount paid out is closer to 15 or 20 percentwill depend on how much 3i spends on new investments, he said.
"We have started to see a pick-up in interesting investmentopportunities ... particularly in the United States and morerecently in Northern Europe," Borrows said, adding the companywas targeting around 500 million pounds of mid-cap privateequity investment annually.
Finance Director Julia Wilson told reporters 3i wasparticularly looking at U.S. businesses with a European angle,and countries and sectors in which it had a good previous trackrecord such as Germany, and industrials.
Middleton welcomed the prospect of new investments for 3i.
"This remains the key piece of unfinished business for thecompany," he said.
Shares in 3i, which have risen more than 70 percent sincethe start of the year, were down 1.15 percent at 377 pence by1314 GMT.
The company, which has been moving away from just privateequity and aiming to balance this better with its infrastructureand debt-management businesses, said net asset value grew 5percent to 326 pence per share in the last three months.
"It has been a very good period of recovery for 3i after toomany disappointing ones," said Borrows.
