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The fact that it is the first flotation of a public asset since Labour came to power nearly nine years ago would alone be enough to guarantee that the sale of mainly state-owned defence technology group QinetiQ received “a frosty reception in certain quarters”, says Michael Harrison in The Independent.
But it has provoked more than that – “paroxysms of rage, and not necessarily from the usual suspects”. Under the deal, the Government will sell half its 56% stake in the company to institutional investors. The remainder of the company is owned by American private-equity group Carlyle (31%) and employees (13%).
This makes both the Conservatives and the Liberal Democrats unhappy. The latter say ministers have left lucrative properties owned by QinetiQ open to asset stripping, with Lord Oakeshott, the spokesman for the Treasury, saying “the Government didn’t sell the family silver, they paid the Americans to take it away”. The Carlyle Group bought its 31% stake for £42m in 2003 – it will now potentially net a profit of about £300m, while Sir John Chisholm, the executive chairman and former chief executive of QinetiQ, could have turned the £129,000 he paid for shares into £20m in under three years.
The Tories have a different complaint. They are concerned that individual investors can’t join in the offering. The MoD and Carlyle insist a cost-benefit analysis shows that it would cost £23m to open up the offering to the public. But City experts say this isn’t true: it would, they say, cost more like £3m and take just a week to organise. Letting everyone in on the deal would also have boosted demand and got another 4%-5% for the business, says Peter Hargreaves of Hargreaves Lansdown in The Daily Telegraph.
Tories are also accusing the deal of being riddled with conflicts of interest. Noreen Doyle is a non-executive of QinetiQ and is on the board of Credit Suisse, the bank jointly running the floatation. “Anyone looking at this would consider it a conflict of interest,” says Alan Duncan, shadow trade and industry secretary.
Overall, Labour’s first flotation has it all, says The Daily Telegraph. “Fat cats… odd-looking deals, and now a set of advisors that has a nifty foothold on the QinetiQ board. The only people not getting a slice of the action are the taxpayers” – the people who actually own the company.
The only plus, says Patience Wheatcroft in The Times, is that the restricted offering means there will be demand for the stock in the after market, and as the MoD will still hold 28% of the shares, the country’s stake will be worth more. Still, there will always be a “niggling sense” that it all could have been done better.
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Annunziata Rees-Mogg
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