Carlyle to complete full exit from QinetiQ

The Carlyle Group is selling its remaining 10.3 percent stake in UK defence group QinetiQ, bringing to an end a successful, if controversial, investment.

US buyout firm The Carlyle Group will complete a full exit from QinetiQ, the former state-owned defence business, by selling its remaining 10.3 percent stake through a private placement.

At today’s closing share price of 209.25 pence, this stake would be worth about £142 million, although Carlyle is unlikely to receive this price for an offering of this size. 

Credit Suisse, JPMorgan Cazenove, and Merrill Lynch have been jointly appointed to run the offering as an accelerated book-building process, whereby brokers sell a large block of shares over a shortened time period.

The move comes after news emerged that Carlyle is teaming up with UK defence group BAe to bid for a nuclear submarine yard in Plymouth. A successful bid would put the two firms in pole position to benefit from the UK’s government’s £25 billion rebuilding plan for its nuclear fleet.

The sale will mark the end of a highly successful investment for Carlyle, which first invested in QinetiQ in 2003. The firm, which was previously the government’s defence research arm DEFRA, was part-privatised, allowing Carlyle to take a 31 percent stake for £42 million.

Carlyle later made a profit of about £160 million when QinetiQ floated in February last year, a return of about four times its initial investment. The flotation caused controversy in the UK, despite the obvious growth of the business, because most of the proceeds went overseas.

Glenn Youngkin, a managing director of Carlyle who has been serving as a non-executive director of QinetiQ, has also resigned from the defence firm with immediate effect. 

Graham Love, chief executive of QinetiQ said Carlyle’s input had been “instrumental in the evolution of our business”. QinetiQ would continue Carlyle’s strategy of making acquisitions in the US, he said. 

Last month Qinetiq paid $173 million for Analex, a US information technology business.