MOD chooses Carlyle as preferred bidder

The Ministry of Defence has chosen the Carlyle Group to invest in Qinetiq,its scientific research organisation. The MOD announced earlier this yearits intention to find a suitable bidder, having shelved earlier plans for anIPO. The government is expected to maintain a majority stake, with theaim of maximising the eventual return to the taxpayer, and will alsointroduce a special share to secure the UK’s wider defence interests overthe longer term. Reports state that a clause will be inserted in the salecontract, which is under final negotiation, to prevent Carlyle from exitingits investment too early, and that the eventual exit will occur throughflotation. The government is expected to allow Carlyle to sell its stake onceQinetiq’s commercial activities have risen from 15% to 50% of totalrevenues, possibly after three years.The MOD’s aim is to develop Qinetiq, and especially to establish a publicprivate partnership which would enhance Qinetiq’s commercial activity.Qinetiq is one of Europe’s largest research organisations, employing over9,000 people and with a turnover of about £800m. It specialises in missile-trackingsoftware, radar technology and other defence systems. Carlyle has$13.5bn of capital under management, mostly in the US. Frank Carlucci,a former US defence secretary, is chairman. It is expected that the existingQuinetiq management team, led by Sir John Chisholm, will be retained.The deal is expected to complete by the end of the year.

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