Disposal of QinetiQ’s US Services Division


QinetiQ Group plc

Proposed disposal of QinetiQ's US Services division and £150 million capital return to shareholders via share buyback, creating a stronger, more focused continuing Group Summary

QinetiQ US Holdings Inc., an indirect subsidiary of QinetiQ Group plc, has entered into a conditional agreement to sell the QinetiQ Group's US Services division (excluding Cyveillance®) to The SI Organization, Inc. for an initial cash consideration of US$165 million plus a potential earnout of up to US$50 million in cash, following a market testing exercise that attracted a number of interested parties.
Proposed return of capital to shareholders of £150 million by way of a share buyback.
Early repayment of the Group's remaining private placement debt (circa £150.3 million) with associated accelerated interest costs of approximately £28.5 million to improve the efficiency of the Group's balance sheet and benefit net earnings by reducing net future finance costs by approximately £12 million per year.
Creates a stronger, more focused Group, offering differentiated high-end technical expertise, which is sufficiently cash generative to support both ongoing investment in growth opportunities and a progressive dividend policy. The dividend per share will not be re-based as a result of the disposal.
The Board believes that the transaction will better position the Group to deliver an increase in sustainable earnings through its Organic-Plus strategy.
Completion is expected in the second quarter of the 2014 calendar year.

The disposal, because of its size in relation to the Group, is a Class 1 transaction for QinetiQ Group plc under the Listing Rules and is therefore conditional, amongst other things, upon the approval of shareholders. Shareholder approval will also be required to provide authority for the Group to implement the intended share buyback. A circular containing further details of the proposed disposal and return of capital and the notice convening a general meeting will be sent to QinetiQ Group plc shareholders as soon as practicable.

Leo Quinn, the Group's Chief Executive said:

“Our strategic review concluded that the sale of the US Services division represents the best route to maximise value for our shareholders from these assets, while retaining a significant footprint in North America for the Group through our Global Products division and Cyveillance® business.

“QinetiQ will be a stronger, more focused Group. With its high quality ‘Core' businesses in defence and security and its growth opportunities, particularly in new sectors and markets, QinetiQ will be better positioned to deliver rising sustainable earnings from its Organic-Plus strategy.

“The Board’s confidence in the cash generative nature of QinetiQ to support both ongoing investment in growth opportunities and a progressive dividend policy is confirmed by our decision to return £150 million to shareholders and not to re-base the dividend per share as a result of the disposal.”

J.P. Morgan Cazenove and UBS Investment Bank are jointly acting as financial advisers, corporate brokers and sponsors to QinetiQ Group plc. Stone Key Partners LLC is also acting as a financial adviser to the Group in relation to the disposal.

This summary should be read in conjunction with the full text of this announcement.

Conference call:
A conference call for analysts and investors has been organised for 08:00 UK time, this morning. The dial-in number is +44 (0)20 3059 8125, password: QinetiQ. A presentation to accompany this call can be found on the Company's website www.qinetiq.com/investors/. The call will be recorded and available on the website later today.


QinetiQ Group plc
David Bishop, investor relations +44 (0)7920 108675

Press Office +44 (0) 1252 393500

J.P. Morgan Cazenove +44 (0)20 7777 2000
Robert Constant
Richard Perelman

UBS Investment Bank +44 (0)20 7567 8000
Tim Pratelli
Daniel Holmes

The Maitland Group (PR adviser)
Liz Morley +44 (0) 7798 683108

QinetiQ People Who Know How
Disposal of QinetiQ’s US Services Division