TERMS for the strategic partnership between QinetiQ and the Carlyle Group were announced yesterday (Thursday) by the Ministry of Defence.

Carlyle, one of the world's largest private investment firms, will acquire a 33.8 per cent interest in QinetiQ, with a further 3.7 per cent to be made available to employees.

In return, the MoD will receive £140 to £150 million. It retains 62.5 per cent for the moment, but ultimately plans to sell its entire stake in three to five years, probably through a stock market flotation.

Announcing the partnership in London yesterday, Defence Minister Lewis Moonie said: "This is good news for taxpayers, who will benefit from the immediate sale proceeds as well as from QinetiQ's potential increase in value over time. And it is good news for QinetiQ's employees, who will have the option to invest in the future of the business through a staff equity scheme and will receive a small free allocation of share offerings."

Formal completion of the sale is expected to take place in the New Year.

QinetiQ is Malvern's largest employer, providing jobs for 2,500 people. It can trace its lineage back to the Telecommunications Research Establishment (TRE), which moved to Malvern in 1942. The establishment has spawned numerous technological breakthroughs, including thermal imaging and liquid crystal displays.

QinetiQ was formed in July 2001, from the greater part of the Defence Evaluation and Research Agency (DERA). It was originally going to be floated on the stock exchange but because of market conditions, a strategic partner was sought.

Sir John Chisholm, QinetiQ's chief executive, said: "Working together, QinetiQ and the Carlyle Group will be a strong team with complementary experience. Carlyle's investment secures a bright, long-term future for our business, our employees and our customers," he said.

Dr Moonie said: "The strategic partnership with Carlyle keeps QinetiQ on course to become a leading science and technology company that aspires to be the envy of the world.

"The Carlyle Group shares our vision for the future of QinetiQ and is well placed to support a company we expect to flourish commercially, based on its commitment to excellence."