QinetiQ completes sale of US Services division, share buy-back to commence

27th May 2014 07:52

Aerospace, defence and security services group QinetiQ has completed the sale of its US Services division, paving the way for a cash return to shareholders.The $165m disposal to US firm The SI Organisation, which was first announced on April 22nd, has received all regulatory and shareholders approvals and was closed on May 23rd.As well as the initial cash consideration, QinetiQ has the potential to earn a further $50m from March 2015 based on the profit performance of the sold assets.The company said on Tuesday that its previously-announced £150m capital return by way of an on-market share buyback will now commence.US Services was sold in an effort to remove QinetiQ's exposure to the US federal services market. The company said the division was was not delivering on its role to grow profitably by building market share, "because it was too small to generate significant economies of scale, but too large to benefit from US government small business set-aside initiatives". QinetiQ also said that as a UK-listed company it faced additional admin costs associated with US national security, to which The SI Organisation will not be subject.The group said in a statement: "The board considers the group, following the disposal of US Services, to be highly differentiated and better positioned to deliver an increase in sustainable earnings from its Organic-Plus strategy."As part of the transaction, QinetiQ will also pay £6m into its pension scheme and make early repayment of its remaining $248m private placement debt.BC