British government completes controversial privatisation of defence group QinetiQ

11 September 2008

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.