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* Full-year NAV per share 348 pence vs forecast 332-344p
* Divestments totalled 669 mln stg, more seen on the way
* CEO says to avoid auctions, costly deals when investing
* Shares up 4 percent (Add banker, analyst comments)
By Sophie Sassard and Pamela Barbaglia
LONDON, May 14 (Reuters) - British private equity firm 3i will stay away from bid battles and expensive deals asit seeks to learn from past mistakes when investing a planned500 million pounds ($842 million) in mid-sized businesses overthe coming years.
The owner of women's fashion retailer Hobbs and TommeeTippee baby bottle maker Mayborn spent much of 2012 and 2013restructuring after shareholders criticised weak results fromits buyout business and a poor share price performance.
CEO Simon Borrows has cut costs, divested some businessesand worked on turning round others and, helped by recoveringfinancial markets, 3i reported a 12 percent rise in its netasset value per share to 348 pence for the year ended March.
That beat analyst forecasts for 332-344 pence and sent thecompany's shares up around 4 percent on Wednesday.
"I expect the pace of realisations to not slow down foranother one to two years and portfolio disposals willsignificantly exceed new investments," said Rob Jones, equityanalyst at Liberum.
3i said its investment portfolio will be slashed and focusedto around 30 companies from an existing 81. Such a process couldtake around three years, Jones said. He believed that theprivate equity firm would realise another 650 million pounds ofexits in the next 12 months.
Borrows said 3i would be patient and disciplined whenreviewing investment opportunities, as a flood of capital andlow interest rates were driving prices up.
"The minute you jump into an auction process you're lookingat double-digit-multiples," said Borrows, adding that 3i tendednot to pay more than 8 times earnings before interest, taxdepreciation and amortisation (EBITDA) for its investments.
FOUR SIZABLE INVESTMENTS
3i could spend an average 70 million per deal going forward,Jones said. It would continue to focus on mid-market investmentsin its core business services, consumer, healthcare andindustrials sectors in Northern Europe and North America.
The firm has recently made four sizable investments:European discount fitness operator Basic-Fit; GIF, aGermany-based specialist in transmission testing; JMJ, a globalmanagement consultancy; and a substantial further investment inferry operator Scandlines.
In total, its cash investments were 372 million poundsincluding third-party funds in the year ended March, comparedwith 149 million pounds the previous year, of which 276 millionpounds involved 3i's own capital.
3i said it also completed 669 million pounds in divestmentsin the year ended March.
After the recent initial public offering of its U.S. animalhealth business Phibro, German car parts maker Hilite could bethe next business put on the block, Oriel Securities analystssaid. They are forecasting 600 million pounds of divestmentsthis financial year.
A sector banker mentioned discount retailer Action as thecrown jewel of 3i's portfolio. With EBITDA of between 125 and150 million euros, Action is a key asset and could be 12 monthsaway from an IPO.
Action, which is headquartered in Amsterdam, offers a mixedproduct range that includes household goods, cosmetics, personalcare and DIY. 3i has so far prioritized an aggressive plan togrow the business in France and Germany with 80 to 100 stores tobe launched in these countries before starting to review exitoptions, according to the banker.
3i confirmed a final dividend of 13.3 pence per share,bringing the total for the year to 20.0 pence per share.
($1 = 0.5939 British Pound) (Editing by Jason Neely and Mark Heinrich)
