Defense Specialist Qinetiq Taps Fracking Boom Via Laser Purchase

Qinetiq Group Plc (QQ/) said the purchase of U.S. laser supplier Redfern Integrated Optics Inc. will help the former U.K. defense-research laboratory tap a fracking boom as it seeks to pare exposure to shrinking military markets.

The acquisition of San Francisco-based Redfern for an undisclosed sum provides Qinetiq’s fiber-sensing unit with technology that will hone monitoring of gas and petroleum wells following hydraulic fracturing, boosting their productivity, Chief Executive Officer Leo Quinn said in an interview.

“The fiber goes down the well and you can detect the relative flow,” Quinn said by phone after Qinetiq announced a return to full-year profit. The company has been involved in pipeline monitoring that can detect everything from oil theft to the position of cleaning “pigs” for years through the application of sonar technology developed for defense purposes.

The fiber-sensing unit also helps monitor railway tracks for companies including Deutsche Bahn AG and Austrian Rail.

Qinetiq is investing in commercial technologies while exiting some defense activities and refocusing others on civil markets. The company has agreed to sell its McLean, Virginia-based U.S. Services arm for $165 million, jettisoning a unit that provides engineering services for the army, back-office support for airport security and lab operations for NASA.

Threat Levels

“It’s one of those businesses that operates on scale and where we’d need to put in investment,” Quinn said. Purchaser SI Organization Inc. already has a footprint in overlapping areas and as a U.S. company will also have lower overheads from administrative obligations associated with the National Industry Security Program than those facing a U.K. firm, he said.

Quinn said that following the sale Qinetiq will retain the high-value Cyveillance business that specializes in analysis of Internet chatter and other information sources to predict threat levels facing businesses and individuals.

Qinetiq, whose main activities include the evaluation of military aircraft and development of unmanned drones, posted an operating profit of 24 million pounds ($41 million) for the 12 months to March 31 after a 121 million-pound year-earlier loss.

The stock rose as much as 2 percent and was trading little changed at 199.50 pence at 1:23 p.m. in London, valuing the company at 1.32 billion pounds.

To contact the reporter on this story: Christopher Jasper in London at cjasper@bloomberg.net

To contact the editors responsible for this story: Benedikt Kammel at bkammel@bloomberg.net

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