UK private equity firm pulls out of Italy

3i, the UK’s largest listed private equity group by funds under management, has announced it is pulling out of the Italian market, as part of a broader programme of cost-cutting.

The announcement comes as 3i issued poor half-yearly results for 2011, “driven by market conditions”. 3i, which has assets under management of £5,262m, reported a loss of £523m for the six months to September.

3i chief executive Michael Queen unveiled a number of measures to battle investor unrest at a poor performance over the past three years. The measures announced include a doubling of the shareholder dividend, from 1.9% to a ‘respectable’ 4%.

Queen also announced a 10% cut in its workforce, bringing the headcount down to about 430. Before the crisis, in 2007, the firm had 750 staff. Queen said this reflected the end of the investment period of 3i’s €5bn buy-out fund, which will not be replaced next year but merged with a growth fund at the end of 2012.

In a statement, Queen said: “We have not been immune to the broader market turmoil and the challenging environment has had a direct impact on our results. However, the steps we have taken over the last two and a half years to improve the financial and operational strength of the Group, and to reduce the risk in our portfolio, give the Board confidence in announcing a significant increase in our dividend today.”

Queen said that despite the economic conditions, “the private equity portfolio delivered an increase in earnings, on a value weighted basis, of 8%. However, it is clear that the environment is creating greater pressure for a number of our portfolio companies.”

In a review of its strategy, London-based Barclays Capital has agreed to sell Barclays Private Equity to Equistone Partners Europe. In the US, private equity giants Blackstone and KKR have also been struggling with difficult market conditions, reporting losses of $529m for Q3 and $342m for Q3 respectively.

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