Defence technology specialist QinetiQ (QQ.) advances 2.1% to 198p as the Sunday Times reports a sale of its struggling US services arm may be on the cards.
While analysts from Liberum Capital agree a sale is likely, they suggest the quoted £300 million to £400 million take-out price may be 'too good to be true' as it implies a valuation for the business of ten times earnings before interest and tax (EBIT) – where US peers trade on seven times.
Liberum's own sum-of-the-parts estimate is £170 million and it assumes proceeds of £200 million from any disposal. We last looked at the investment case for the wider group in May.
According to the newspaper report, the former Ministry of Defence research arm, believed to be the inspiration for James Bond's gadget-man Q, has appointed US investment bank Stone Key Partners to oversee an auction of the division.
Chief executive officer Leo Quinn said he would conduct a strategic review of the unit back in May – following the impact of widespread defence cuts in the US. In the year to 31 March its operating profits fell 31.8% to £21.9 million. The concern is seen as being too small to achieve economies of scale but too big to benefit from preferential status on bids given to small suppliers.