Serco, the speed cameras to atomic weapons group, is considering taking a stake in Qinetiq, the Government's scientific defence research company.
Several private equity firms are also lining up, including Legal & General Ventures and Carlyle Group. Charterhouse Development Capital is also thought to be interested.
Last week it was announced that Qinetiq would not be floated on the stock market, and a strategic investor would be sought. The company was formed last year from the Defence Evaluation and Research Agency, leaving highly sensitive divisions such as biological and chemical weapons research deep within the Ministry of Defence.
The MoD wants Qinetiq to exploit its scientific discoveries commercially. The government-owned company contains a lot of inventions, but has only recently started to try to exploit these in the commercial world.
Those wishing to take a stake in the company must give expressions of interest by Friday to UBS Warburg, which is advising the MoD on the sale. The MoD will then sift the bidders and exclude those considered a security risk. Qinetiq handles many top-secret projects, because it works for the MoD and the security services, so the vetting will be strict.
The bidders must fill out a questionnaire on their intentions; the MoD will then decide who is eligible to receive the information memorandum Qinetiq is preparing.
Serco is likely to be a popular choice within the Government because it is so well trusted. It runs numerous classified projects, such as the four-minute warning system, the atomic weapons establishment and information systems for the National Crime Squad.
It also runs the National Physical Laboratory, and has successfully expanded and commercialised it, which could be taken as a model for Qinetiq's expansion.
Carlyle Group, the US private equity firm, is also likely to be favoured by some, because its European chairman is John Major, the former Prime Minister. But it is a foreign firm so there may be opposition.
Kevin Beeston, the chief executive and soon-to-be chairman of Serco, said he would consider bidding for Qinetiq "when we know what the documents say and what the Government is looking for".
Adrian Johnson, the managing director of Legal & General Ventures, said he too would be applying.Reuse content