SHARES in defence firm QinetiQ have been set at between £1.65 and £2.05, the business has announced.

The announcement of the shares, available to institutional investors and eligible employees of the company, comes after the news of the first full privatisation by the Labour Government was revealed earlier this month.

A statement from the company said: "All employees who were part of the company in July 2003 - this represents about three quarters of the current workforce, were granted share options.

"A further 2000 staff chose to invest their own money in a separate scheme in the company.

"Moving forward, all staff have now been invited to invest in the firm and will be offered £500 of free shares."

The organisation employs about 2,500 people at one of its sites in Malvern's St Andrew's Road.

A series of questions were aired in parliament earlier this month calling for the Ministry of Defence - which owns 56 per cent of the company - to open the flotation to retail investors. QinetiQ is thought to be worth about £1bn, with the US equity firm Carlyle Group owning 31 per cent and staff the remaining 13 per cent.

The flotation is expected to raise total gross proceeds of approximately £582m, including gross primary proceeds of £150m for the company.

QinetiQ intends to use the sum principally towards continuing to grow its business, in the short term making a one-off £45m payment to reduce the deficit in its defined benefit pension scheme.

Commenting on the share price announcement, QinetiQ chairman Sir John Chisholm said: "Today marks a further milestone in QinetiQ's progress to becoming a vibrant, growing and innovative public company.

"We're delighted by the level of investor interest that has been shown at this stage in the process which we believe illustrates the uniqueness of QinetiQ and the opportunities available in our marketplace," he said.