UK defence and security technology specialist Qinetiq is to use the estimated £150 million ($268 million) proceeds from its upcoming flotation to reduce its debt and pension scheme deficit in the short-term, as well as continuing to grow its business.

Main shareholders Carlyle Group and the UK defence ministry have given the go-ahead for an initial public offering (IPO), set to take place in February. Both shareholders also intend to sell a part of their holdings.

Qinetiq says it will use the proceeds from the IPO to grow its business “both organically and through appropriate acquisitions”. In the short-term the company will use part of the funds to make a one-off payment of around £45 million to reduce the deficit in its pension scheme and the remainder to reduce amounts drawn under its revolving bank facility.

Qinetiq chairman John Chisholm says the IPO marks a “watershed” in the company’s development and will “provide us with the tools to continue to implement our ambitious goals”.

Carlyle Group and the UK government currently own stakes of 31% and 56% respectively. The company says it will make “significant secondary proceeds” from the sales of part of these holdings.

The company has appointed Credit Suisse First Boston (Europe), JP Morgan Cazenove and Merrill Lynch International for the flotation and intends to offer shares to institutional investors and eligible employees.

Qinetiq posted turnover of £872 million in 2005, compared with £795 million the previous year.

Source: Flight International