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Last Updated: Thursday, 12 January 2006, 12:58 GMT
UK to float defence firm Qinetiq
Qinetiq advertisement
Qinetiq's military products are expected to be much in demand
The government is to sell its majority stake in defence firm Qinetiq and float the business on the stock exchange.

Defence Secretary John Reid said an initial public offering for Qinetiq shares would take place in February.

The sale is expected to raise 1.1bn ($1.9bn), but the government said it would retain a major stake in the firm.

US private equity firm Carlyle is currently the company's other main shareholder. Qinetiq employs more than 9,000 people across the UK.

Blue-chip clients

Mr Reid said the government would maintain a "special share in Qinetiq to protect the United Kingdom's defence and security interests".

The company's products include military sensors and software, and banking security systems, while its clients range from the Pentagon to jet engine firm Rolls-Royce and credit card company Barclaycard.

Most Qinetiq staff were not given the opportunity to purchase the... share options available to senior management that will now generate a massive windfall
David Luxton, Prospect union

The sell-off will be the first full flotation of a public sector entity since Labour came to power in 1997.

The Ministry of Defence owns 56% of Qinetiq, with 31% in the hands of the Carlyle Group and 13% held by its managers and other staff members.

However, the sell-off is expected to be controversial because of the huge profits that the Carlyle Group stands to make through the sale.

The private equity group bought a 34% stake from the Ministry of Defence in 2002 for 42.2m. It now holds 31%, which could be worth about 340m.

The government said the Carlyle Group would also "continue to retain a significant stake in the company".

'Lost opportunity'

Speaking before the announcement, Liberal Democrat Treasury spokesman Vince Cable said he was concerned the the Carlyle Group's likely profit on its stake indicated the taxpayer had lost out.

"I'm seriously worried that the government massively miscalculated the value of its own assets and has sold the taxpayer short," he told the BBC.

Prospect, the union which represents many of Qinetiq's staff, described the plans as a "lost opportunity" to reward workers at the forefront of Britain's technology industry.

"Most Qinetiq staff were not given the opportunity to purchase the highly geared share options available to senior management that will now generate a massive windfall on flotation," said the union's national secretary David Luxton.

In the year to 31 March 2005, Qinetiq made operating profits of 69.7m from a turnover of 872.4m.

See some of the products and services provided by Qinetic

Government 'to sell off Qinetiq'
08 Jan 06 |  Business
Qinetiq's new battle
30 Apr 02 |  Business

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