THE CHIEF executive of Qinetiq yesterday said he would consider “strategic acquisitions” both in the UK and overseas, as the British defence technology firm announced the long-awaited sale of its struggling US services division.
FTSE 250-listed Qinetiq has agreed to sell the unit, which offers cyber security services, for $165m (£98.1m) to US-based company The SI Organisation.
On completion of the deal – expected in the second quarter – it will use the proceeds, along with cash on its balance sheet, to repay private placement debt and return £150m to investors via a share buyback.
Qinetiq’s shares closed 1.85 per cent lower, with analysts at Liberum calling the disposal price “disappointing”.
The sell-off had been on the cards since last May, when Qinetiq announced that it was reviewing the division, which fell into losses of £240.7m last year.
“We don’t see the outlook for that market as very positive and the division had no synergies with the rest of our business,” chief executive Leo Quinn told City A.M., calling Qinetiq’s move into the sector “a flawed diversification strategy”.
The broader US defence market has struggled in the face of federal spending cuts, but Quinn denied any further US disposals were in the works. He said the company is focusing on international expansion – citing Canada, Australia and the Middle East as areas of interest – and that acquisitions could play a part.
He added that Qinetiq “would not hesitate” to buy an asset in the UK if the right opportunity arose. JP Morgan, UBS and Stone Key Partners are advising Qinetiq on the disposal.