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Last Updated: Friday, 10 February 2006, 17:39 GMT
Market debut for Qinetiq shares
QinetiQ at Portsdown Hill near Portsmouth
Qinetiq's military products are expected to attract strong demand
Shares in Qinetiq, the defence firm being floated by the government, began conditional trading on Friday.

The shares sold were priced at 200 pence each, giving the firm an initial market valuation of 1.3bn ($2.3bn).

The flotation has attracted criticism because of the amount of money that US investor, Carlyle Group, will make from the privatisation.

Government ministers have defended the listing, saying taxpayers are getting value for money.

By the close of trade on Friday, Qinetiq shares were trading at 213p ahead of full trading which will begin on Wednesday.

Investor interest

Carlyle, which owns 31% of the business, stands to make a profit of up to 370m from the flotation from its original 42m investment.

The National Audit Office (NAO) is investigating whether the Ministry of Defence (MoD) - which currently owns 56% of the business - sold shares too cheaply to the private equity firm in 2002.

The real winners are the taxpayers
Lord Drayson, defence procurement minister

The MoD's stake will be cut to about 23.7% following the flotation, while the Carlyle Group will own about 12.9% of the business.

The float is the first privatisation by the Labour government since it came to power in 1997 and has attracted strong interest from investors.

Lord Drayson, the defence procurement minister, defended Carlyle Group's involvement, saying it had brought in extra investment and helped to transform the business.

"The real winners here are the taxpayers," he told the BBC, adding that he welcomed the NAO's review.

"It is an important privatisation and it has been done in a new modern approach. The process has been consistent with the NAO code of conduct for privatisations."

Diverse clients

The listing in London will raise 617.5m, 150m of which will be kept by the company.

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.

Qinetiq employs more than 9,000 people across the UK.

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




BBC NEWS: VIDEO AND AUDIO
What the government can expect from the flotation



SEE ALSO:
Reid defends Qinetiq's sale price
27 Jan 06 |  Business
Qinetiq names float price range
25 Jan 06 |  Business
Government 'to sell off Qinetiq'
08 Jan 06 |  Business
Qinetiq's new battle
30 Apr 02 |  Business


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