Private equity firm 3i runs the rule over Connaught

Private equity group 3i has run the rule over social housing group Connaught but a takeover deal is not imminent, sources close to the situation have confirmed.

According to various sources, 3i has weighed up the possibility of merging the £660m-turnover Connaught with its Enterprise outsourced maintenance business but it is one of several options the private equity firm is considering in the social housing arena. There is no indication that 3i has so far made any approach for Connaught.

The news follows market rumours earlier this week that a takeover deal was imminent, which pushed up Connaught’s share price by 11.5p to 302.5p.

3i bought Enterprise for £486m in March 2007.

One source said: “In order to extract some value from its Enterprise investment, 3i would have to do something like combine it with Connaught. Given how the market has dipped since 3i bought Enterprise, the move for Connaught is certainly in their thinking.”

Another source said: “3i has looked at Connaught but is interested in the social housing space as a whole. It is too early to say whether a deal will happen, particularly as 3i is still in the running for the HBOS integrated finance portfolio, which includes Apollo and Keepmoat.”

A third source who confirmed 3i’s interest in Connaught, said any move would be dependent on 3i raising a large amount of cash. “It would be a lot of money and 3i would be putting a lot of eggs in one basket.”

Analysts estimate that Connaught would come with a price tag of between £500m and £600m.

Connaught and 3i declined to comment.