QinetiQ, the UK Government’s defence research company, has launched on the London Stock Exchange at 200 pence per share, valuing the company at £1.3bn. Carlyle made £161.5m on its 34% stake, a 4x return.
The UK’s Ministry of Defence (MoD) now owns about 19.3% and Carlyle about 10.5%. There was a large demand from institutions and retail investors, leading to the offer being six times over subscribed, but the company failed to achieve its target of a 25% US investor base, settling instead for 20%. US investors were reportedly put off by the IPO price tag. UK investors made up 65%, UK retail investors 5%.
QinetiQ became Carlyle’s first UK venture investment when it paid £42m for its minority shareholding in December 2002, a deal that valued the company at £500m. Since then, many observers have questioned the price Carlyle paid, and in the build-up to the float numerous figures criticised the MoD’s handling of the deal.
The UK Government accounts watchdog the National Audit Office has launched an inquiry into the float after former defence ministers raised concerns that the stake was sold to Carlyle too cheaply.
At the time, then defence minister Lewis Moonie, said: “This is a good deal for the taxpayer, for QinetiQ and for the company’s employees. At completion, the taxpayer will have received a total so far of around £200m and the MoD’s retention of a significant stake in the business will ensure that the taxpayer shares in the anticipated future growth in the value of the company. The company will benefit from the injection of new private sector capital together with the Carlyle Group’s track record in assisting companies to grow and develop.”
Current procurement minister, Lord Drayson, was forced on the defensive this time around, arguing that the IPO was an excellent one for the British taxpayer, which is now £358m better off following the share sale. Drayson also had to defend the amounts made by QinetiQ’s bosses. Chairman Sir John Chisholm paid £130,000 for his shares in 2003. This stake is now worth £28m. He said: “The management bought the shares, took the risk, and a considerable number of people at that time passed on the opportunity. Yes, Sir John Chisholm made over £26m, but taxpayers made 25 times that.”