Join our community of smart investors

Qinetiq's US sale underwhelms

Despite the low sale price, Qinetiq has at least got its underperforming US services division off the books
April 22, 2014

Almost a year after beginning a strategic review of its US services division, Qinetiq (QQ.) has sold the underperforming business to a private equity-backed American defence contractor. But the reaction in the City was rather muted. Despite receiving a number of bids, a sale price of $165m (£100m) plus maximum earn-out of $50m is "a bit disappointing", according to Investec Securities, which was after £170m to £220m.

IC TIP: Buy at 219p

There are plenty of positives, though. Most importantly, Qinetiq has got a struggling business off its books, and using the money and its already substantial cash pile to repay private placement debt early will save £12m a year in finance costs. There's a £150m share buyback (at 23p a share, it's half what Investec expected), which should underpin the share price, too.