QinetiQ plans 10 per cent buyback after sale of US business

22nd Apr 2014 07:06

Defence technology group QinetiQ has agreed to sell its US services arm and return the bulk of cash to shareholders. With a cash consideration of $165m (£100m) to be paid, plus a potential earn-out of up to $50m, the FTSE 250 company said it intends to return much of the value via a a £150m share buyback.The buyback is equivalent to 10.2% of the company's market capitalisation on Thursday April 17th.The earn-out is based on the gross profit performance of the US Services division in the financial year ending March 31st 2015.Completion of the disposal is expected to occur before the end of June 2014.The disposal, which does not include QinetiQ's Cyveillance unit, was proposed after a strategic review initiated because the US Services division was "not delivering on its role in the portfolio" and was not large enough to benefit from economies of scale and faced additional costs from being owned by a non-US company. The division, excluding Cyveillance, lost £240m before tax on £464m revenue in the year to March 2013.Following the disposal QinetiQ said it will operate two divisions, EMEA Services and Global Products, and focus on its 'Organic-Plus' strategy of driving sustainable services and establishing partnerships and licensing from its products.