Shareholders approved plans for Britain's biggest privatisation since Prime Minister Tony Blair took power in 1997 on Thursday, agreeing to float part of QinetiQ, a technology firm carved from the Ministry of Defence, Reuters reported. Analysts expect the IPO to value the company at about 1 billion pounds ($1.77 billion), with the Ministry of Defence and U.S. private equity firm Carlyle Group each reducing their stakes. "I've seen they're talking about 14-16 times 2006 earnings, and that puts it at 900 million to 1.1 billion pounds," said one UK-based fund manager who said he was considering buying. Some opposition politicians have criticised the controversial floatation, calling for an investigation into whether the Carlyle stake was handed over too cheaply when it paid 42 million pounds for a 31-percent stake in 2003. The IPO is planned for February subject to market conditions, the government said in a statement. "Following the IPO, both the government and Carlyle will continue to retain a significant stake in the company," it said, adding that the government will also retain a special share in Qinetiq to protect the UK's defence and security interests. Analysts expect both shareholders to sell about half of their holdings but no such details were announced. "We expect to announce details soon," QinetiQ Chief Financial Officer Doug Webb told Reuters. In addition to Carlyle, the defence ministry owns 56 percent of QinetiQ while employees also own a stake. Investment banks CSFB, JP Morgan and Merrill Lynch are acting as bookbuilders for the IPO. "The government believes that an IPO provides the best route for QinetiQ further to develop its excellence as a supplier of battle-winning technology to our armed forces while also creating new opportunities to exploit British technology in a global market," the government statement said. QinetiQ used to be part of the MoD's former Defence Evaluation Research Agency (DERA). It has developed technology including scanners used to detect concealed weapons, illegal stowaways on trucks and debris on airport runways. "They do have tons of intellectual property across the company that could one day unlock some value. It's a tricky one to look at. There's no other company like it," said one brokerage analyst. "They've been quite sharp, I think, in the way that they've managed to harness the technologies and transfer them into technical expertise which they can then generate into a good business with good, strong cashflow," said Euan Stirling, investment director at Standard Life Investments. The company employs 11,500 people, about a quarter of them in the United States where it has bolstered its prescence through acquisitions in recent years.
