QinetiQ

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QinetiQ (Template:Lse) (pronounced kĭ-nĕt'ĭk, as in kinetic energy) is a British defence technology company, created out of the greater part of the government agency DERA when it was split up in June 2001 (with the smaller part forming Dstl). The Chief Executive at inception was the present day Chairman Sir John Chisholm. The current CEO is Graham Love.

In solving defence and security problems they operate at the leading edge of both the development and application of science and technology. This enables them to give commercial customers access to solutions that are often beyond the state-of-the-art available in civil markets.

When QinetiQ was created, the announcement by Defence Minister Lewis Moonie said that company would become, and remain, a British company based in the UK. The Ministry of Defence would retain a 'Special Share' in the company, and safeguards will be in place to prevent conflicts of interest. In February 2003, the U.S. private equity firm the Carlyle Group acquired a 33.8% share in the company for £42m. Current ownership is split between the MOD (56%), Carlyle Group (31%) and staff (13%). The Carlyle Group was expected to invest for three to five years, after which a stock exchange float would take place.

As a privatised company, QinetiQ is now one of the largest defence research organisations in the world. While part of DERA, the defence research sites that now form QinetiQ carried out testing, research and development, including the invention of liquid crystal displays, the technology for flat panel speakers, microwave radar, Chobham armour, and thermal imagers. In recent years QinetiQ has also developed software products, especially those for the defence and security industries.

QinetiQ has a long term agreement (25 years) with the Ministry of Defence to manage military ranges. It is a major stakeholder in the UK Defence Technology Centre which place military research contracts on behalf of the UK Ministry of Defence.

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Organisation

The QinetiQ group has been split into three major divisions since April 2005:

  • Defence and Technology,
  • Security and Dual Use,
  • North America - contains the North American acquisitons listed below.

The major UK sites are at Farnborough, Hampshire (the historical Royal Aircraft Establishment) and Malvern, Worcestershire (the historical RSRE/RRE/TRE), each having more than 2,000 employees. Trials aircraft are flown out of Boscombe Down. The total number of UK employees is believed to be around 9,000 (figures as of April 2005).

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Acquisitions

In September 2004 QinetiQ acquired the U.S. defence companies Westar and Foster-Miller (maker of the Talon robot).

In early August 2005 QinetiQ announced that it would acquire Apogen Technologies, Inc., pending regulatory approval. The QinetiQ website lists this merger as costing $288.0m (£162.7m).

In September 2005 QinetiQ acquired a 90% share of Verhaert Design and Development NV (VDD), the leading Belgian space systems integrator.

In October 2005 QinetiQ acquired Broadreach Networks Limited, a leading supplier of Wi-Fi internet to the European rail industry.

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Recruitment

QinetiQ is one of the UK's largest employers of science and engineering graduates - recruiting around 300 a year. Since 2002 it has appeared in the Times Top 100 Graduate Employers list.

In September 2005 Graham Love replaced Sir John Chisholm as Chief Executive. John Chisholm became Executive Chairman; the previous chairman Dame Pauline Neville-Jones having resigned earlier in the year. The move of Chisholm to Chairman was criticised by some in the UK financial press as an example of poor corporate governance.

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Stock Exchange Listing

QinetiQ was expected to float on the London Stock Exchange in early 2006. The company had been valued at between £1.1bn and £1.3bn, with the MOD holding estimated to be worth £616m - £728m, the Carlyle Group's holding £341m - £403m, and staff/management's holding worth £143m - £169m. Some controversy was generated by the very large likely returns for the Carlyle Group and senior managers, with figures of over £20m suggested in the media for Sir John Chisholm.

Financial press speculation concerning a stock exchange float increased in January 2006. On January 12 an announcement was made in parliament by Dr John Reid, Secretary of State for Defence. He said that the Carlyle Group, 'will continue to retain a significant stake in the company', and that the British government would continue to hold a 'Golden Share' in QinetiQ to protect the United Kingdom's security and defence interests.

Controversy also arose around the fact that retail investors were to be excluded from the Initial Public Offering (IPO) due to QinteQ's complexity and the fact that institutional investors would require less complicated marketing and financing. This led to contrasts with the 'Sid' campaign for British Gas in 1986, where retail investors were encouraged to buy shares, both with discounts and a large advertising campaign. The issue was partially resolved by allowing some brokerage firms to place orders in the IPO as part of a combined order, allowing the firm to purchase as though an institutional investor, but on behalf of clients. While this did not result in a public campaign or retail investor discounts, it did allow many investors to purchase shares directly in the IPO.

The company floated on 10 February 2006, with an IPO of 200p per share, which gave QinetiQ an initial market value of £1.3bn. On 13 February 2006 (the Monday after the Friday IPO) QinetiQ shares closed at 219.5p per share, valuing the company at over £1.4bn. However, by late March 2006 QinetiQ shares dropped 15% from that peak (7% from the IPO price) to 186p each.

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See also

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External links

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QinetiQ companies

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Commentary

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