3i Top Holdings Down 21%, Queen Named New CEO

LONDON (Reuters) 3i Group Plc (III.L) on Wednesday said it had replaced its chief executive and that its biggest investments had plunged in value last quarter, sending its shares to a record low.

The private equity group, whose portfolio includes lingerie brand Agent Provocateur and laser eye correction business Ultralase, said it was braced for a sustained period of tough market conditions.

Infrastructure head Michael Queen will replace Chief Executive Philip Yea, who was in charge since July 2004. 3i spokeswoman Leonie Foster said Yea’s departure was a “mutual decision”.

In a note to clients, Cazenove analysts said: “We were surprised by the resignation of Phil Yea who was widely respected and has been responsible for modernising 3i’s business model during his 5-year tenure.”

They said the “only blot on his copybook” was the most recent return of capital, which was good for shareholders but “left 3i too highly geared going into the downturn”.

Yea, a non-executive director at Vodafone (VOD.L), will help Queen take charge before leaving in March.

Private equity firms worldwide are under pressure as weakening economies strain the companies they own, and as scarce, costly debt crimps their ability to make new deals. In December 3i said it would cut about 15 percent of staff.

3i estimated a 21 percent reduction before currency gains in the value of 50 of its top investments, which together make almost two-thirds of its total portfolio value.

It realised proceeds of 345 million pounds and made new investments worth 173 million.

In a statement, finance director Julia Wilson said the management and performance of investee companies remained 3i’s “highest priority” and it was being “highly selective” about new investments.

“We are planning on the basis that the current business environment will continue for a sustained period,” she said.


3i’s third quarter ending Dec. 31 showed it could still make disposals in a tough market, analyst Stephen Peters at brokerage Charles Stanley said, but a focus on mid-market European private companies, and its high gearing, made life harder as economies slowed.

“It’s perfectly positioned to benefit on the way up, and it’s perfectly positioned to get absolutely killed on the way down,” Peters said.

Shares in 3i, already down about 70 percent in the last six months, hit a record low at 229-1/2 pence in early trading. The stock was 2.55 percent lower at 248-1/4p by 1349 GMT.

Its biggest investments include stakes in: sister funds 3i Infrastructure Plc (3IN.L) and 3i Quoted Private Equity Plc QPE.L; in UK oil and gas producer Venture Production Plc (VPC.L); UK infrastructure maintenance company Enterprise; and Italian garden power tools firm Viridis Holdings S.p.A.

3i made net foreign exchange gains of 279 million pounds ($393.7 million) in its third quarter and said net debt on a constant currency basis was largely unchanged.

Bank of America Merrill Lynch analyst Philip Middleton cut his rating on the stock to “neutral” from “buy” and said Queen’s appointment could “suggest a move towards battening down the hatches further, as the company seeks to get to grips with its balance sheet”.

Patrick Dunne, group communications director, told a conference call there was “nothing we can say” about a Times report it was facing a possible creditor takeover at VNU Business Media Europe, a Dutch firm it bought at the height of the buyout boom

By Quentin Webb