The controversial privatisation of UK defence research group QinetiQ has finally been completed after the British Government sold its remaining 18.9 per cent, raising £254 million after costs. Shares were placed with several institutions at 206p - just 6p above the price at which the company was floated in 2006. That put the value of the company at £1.34 billion.

QinetiQ, whose products include bomb-disposal robots and body scanners, saw its shares close down 13.5p to 210p on yesterday's news of the government's intention to offload its stake. However, it will continue to retain a "special share" in QinetiQ, giving ministers control over any possible takeover.

The UK ministry of defence (MoD) said, "The government always made it clear that ultimately it anticipated selling its entire financial stake in order to realise its financial investment and to achieve best value for money for the UK taxpayer. The decision to sell was based on specialist advice from a number of city institutions."

The announcement comes a week after QinetiQ won a lucrative £150m contract from the ministry of defence to provide testing and design services for ships, submarines, and other maritime equipment. But the MoD will also be hoping that the sale draws a line under a highly contentious privatisation.

QinetiQ emerged from the state-owned Defence Evaluation and Research Agency. Britain first sold shares of QinetiQ in 2002, when US private equity firm Carlyle bought a 31-per cent stake for £42 million and made more than a £300 million profit when the company was floated on the stock exchange four years later.

Later, the National Audit Office (NAO) reported that taxpayers could have gained "tens of millions" more and was critical of the incentive scheme given to QinetiQ managers, the 10 most senior of whom gained £107.5 million on a total investment of £540,000 in the company's shares.

The return of 19,990 per cent on their investment was described as "excessive" by the NAO. The role of QinetiQ's management in negotiating terms with the Carlyle Group, while the private equity company was bidding for the business, was also criticised by the NAO. 

The Public Accounts Committee said in a report in June that the MoD had been "like an innocent at a table of card sharps" over the privatisation and said that the British taxpayer had lost out on almost £100,000 on the deal.

QinetiQ had been privately lobbying the government to sell its remaining stake, and chairman Sir John Chisholm said, "The QinetiQ board welcomes the announcement which it believes will broaden the shareholder base of the company."

Credit Suisse Securities, JPMorgan Cazenove and Merrill Lynch had been named as co-coordinators and bookrunners with N M Rothschild named as independent financial adviser.

Baroness Taylor, UK minister for defence equipment and support, was a staunch supporter of the deal - "The privatisation of QinetiQ transformed it into a successful British-based company employing around 13,000 people, and raised £830 million for the taxpayer."

"QinetiQ and its staff can be rightly proud of what the company has achieved since it was created in 2001. They remain a very important supplier to the MoD, and we wish them every success,'' she added.

The company reported a net profit of £47.4 million pounds ($84 million) in the year ending 31 March, down from £69 million in the previous year. The Ministry of Defense is QinetiQ's biggest customer, accounting for 44 per cent of revenues in the latest full year.

The company's portfolio includes the Tarsier system for detecting potentially hazardous objects on airport runways, the Zephyr high-altitude pilotless airplane, and the SPO-20 threat detection system for scanning people. In addition to numerous locations in Britain, QinetiQ has facilities in Australia and in the US states of Virginia, Massachusetts and Alabama.