Hexagon divests a small non-core business

Hexagon announced on Tuesday that it has agreed to sell an industrial measurement instrument business to a Chinese company. We expect the impact on the company’s EBIT and cash position to be very small.

Divestment’s impact on earnings is limited

Hexagon has agreed to sell its Tesa Precision Measurement Instruments business to Hangzhou Great Star Industrial Company. The sold business had revenue of 50.9 MEUR in 2022 with below group average profitability. The divestment could have a negative impact of some 0.5% on group adjusted EBIT assuming that the divested business had an adjusted EBIT-margin of 15%. The deal is expected to close in Q1 2024. Further guesstimating that the business was sold at EV/EBIT 15x, the cash inflow from the divestment could be around 100-130 MEUR (some 0.4% of Hexagon’s market cap).

Hexagon focuses on markets with a better growth profile

Hexagon states that the divestment reflects the group’s commitment to focus on core business activities directly accretive to its mid-term growth, margin and cash generation targets. We find Tesa’s underlying industrial metrology market to be in a rather mature phase which does not leave much room for innovative growth. In the past years Hexagon has mainly acquired software businesses. It has at the same time developed its hardware offering organically especially in those segments where it sees the highest potential.