Yea to leave 3i after investments fall by a fifth

Philip Yea, the chief executive of 3i, is stepping down from the UK's biggest venture capital company after revealing yesterday that its investments plunged in value by a fifth during the last quarter of 2008.

3i, which owns companies including the lingerie brand Agent Provocateur and the laser eye correction business Ultralase, warned it was braced for a sustained period of tough market conditions.

3i's infrastructure head Michael Queen will replace Mr Yea, who has been in charge since July 2004. The company said the departure was a "mutual decision" and Mr Yea himself defended his performance. "3i's strong position gives it significant scope to develop further once external conditions improve," he said.

Having joined the company from the Kuwaiti-backed buyout firm Investcorp, Mr Yea led 3i to diversify from its very UK-centric buyout and venture capital base and to expand its operations in the infrastructure sphere, where it has looked at assets including broadcast masts and water companies, as well as emerging markets like India.

Set up under Mr Yea, 3i's infrastructure fund was floated in 2007 under Mr Queen's leadership. Mr Yea, who is also a non-executive director at the communications giant Vodafone, will help Mr Queen, 3i's former finance director, take charge of the company's operations before formally standing down from his post in March.

Private equity and venture capital firms have come under pressure as weakening economies strain the companies they own, and as scarce, costly debt crimps their ability to buy new companies. In December, 3i said it would cut about 15 per cent of staff.

One of the firm's investments, the Dutch media company VNU, is close to breaching its banking covenants and entering restructuring talks with its creditors, said a source familiar with the matter. A 3i spokeswoman, while declining to comment directly, said: "We do believe in the business and remain very supportive of it."

For the final quarter of last year, 3i estimated a 21 per cent reduction before currency movements in the value of 50 of its top investments, which together account for almost two-thirds of its total portfolio value.

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.

Shares in 3i, already down about 70 per cent in the past six months, fell by 1.4 per cent yesterday after earlier in the day hitting a record low.