The IPO of UK defence research company QinetiQ could total up to £629m and value the whole company at £1.33bn, according to terms set out for the deal. As the company published its price range, the IPO continued to attract the high levels of interest and criticism commonplace in privatisations. This is the first UK privatisation since 1997, and the fact that it involves a private equity company making a profit has helped stoke the publicity.
Despite this, the deal has progressed smoothly and bankers involved argue that any external factors have had no impact on the performance of the deal so far. “If you are a government privatising a company, you have to accept that you can’t ever convince everybody you have got it right,” said one banker involved.
The price range was set at 165p–205p. The deal includes a £150m primary portion, with the amount of stock issued dependent on pricing, and a secondary disposal by the UK government and private equity firm Carlyle Group.
Assuming the deal prices at 185p, the mid-point of the range, the UK government would see its stake fall from 56% to 23.7%, while Carlyle would move from 30.5% to 12.9%. With the addition of the £150m capital increase, the deal would total £582m at the mid-point, with a 10%–15% greenshoe on top of this.
The range puts the company on a P/E multiple of 14.6x– 17.7x for 2007, against UK mid-cap defence stocks that average 16.5x. Ultra Electronics trades at the highest multiple of these, at 18x, with Meggit and Cobham at about 16x.