MoD approves QinetiQ IPO

The UK’s Ministry of Defence has given the go-ahead for a planned February flotation of the Carlyle-backed defence research laboratory.

The UK Government has given its approval for QinetiQ, the Ministry of Defence’s advanced research laboratory which is part-owned by the Carlyle Group, to go ahead with a flotation on the London Stock Exchange.
John Reid, secretary of state for defence, announced the intention to float QinetiQ in a statement: “This is the best way for QinetiQ to develop further its excellence as a supplier of battle-winning technology to our armed forces, while also creating new opportunities to exploit British technology in a global market,” he said.
Reid added: “The Government will retain a significant stake in the company, which will ensure that the taxpayer will continue to benefit after the flotation. The Government will also retain a special share in the company to ensure that the UK’s defence interests are safeguarded.”
QinetiQ is expected to raise £1.1 billion (€1.6 billion; $1.9 billion) in the planned February IPO. Reid said that the timing of the flotation is subject to market conditions.
Carlyle acquired a 31 percent stake in QinetiQ in December 2002 for £42 million and is expected to retain a significant stake following the flotation. Market sources have valued Carlyle’s stake at up to £340 million.
Graham Love, chief executive of QinetiQ, told the Financial Times that, despite criticism that Carlyle had been able to buy into QinetiQ too cheaply, the US-headquartered private equity firm put in the highest bid.
The Ministry of Defence holds a 56 percent stake in QinetiQ, with the remainder owned by management.
According to a statement from QinetiQ, the company intends to use part of the proceeds to make a one-off payment of approximately £45 million to reduce the deficit in its pension scheme.
Hampshire, England-based QinetiQ focuses on three principal markets: the UK defence market; related commercial markets (including security and counter-terrorism); and the North American defence and security market. The company generated profits of £69.3 million from total turnover of £872.4 million in 2005.