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Hexagon AB

Hexagon AB

Cylindervägen 12
Box 1112 SE-131
26 Nacka Strand,
Sweden
Telephone: (46) 8 601 26 20
Fax: (46) 8 601 26 21
Web site: http://www.hexagon.se

Public Company
Incorporated:
1975 as Eken Industri & Handel AB
Employees: 6,000
Sales: SEK 8.26 billion ($1.24 billion) (2004)
Stock Exchanges: Stockholm SWX Swiss
Ticker Symbol: HEXA B
NAIC: 326220 Rubber and Plastics Hoses and Belting Manufacturing; 326291 Rubber Product Manufacturing for Mechanical Use; 333910 Pump and Compressor Manufacturing; 333995 Fluid Power Cylinder and Actuator Manufacturing; 334419 Other Electronic Component Manufacturing; 334513 Instruments and Related Products Manufacturing for Measuring, Displaying, and Controlling Industrial Process Variables; 334519 Other Measuring and Controlling Device Manufacturing; 339991 Gasket, Packing, and Sealing Device Manufacturing; 551112 Offices of Other Holding Companies

Hexagon AB is a global technology group. It aims to achieve earnings per share growth of at least 15 percent a year in market-leading businesses. Innovation and efficiency are the other pillars of its success. One of the group's main focuses is metrology, or measuring technology; it has acquired the venerable Brown & Sharpe machine tool business. It owns other, engineering-related businesses and holdings in advanced polymers.

ORIGINS

Hexagon AB is not related to a Swedish conglomerate of the same name that existed in the 1970s and 1980s. Hexagon AB instead traces its origins to the founding of Eken Industri och Handel AB, which was registered on September 25, 1975. Eken Industri merged with its parent company, Investment AB Eken, in May 1987. The group then had annual turnover of more than SEK 400 million.

Hexagon Aktiebolag was formed in 1992. It was led by industrialist Torbjörn Ek. Soon after its launch, Hexagon AB bought a 49.9 percent voting interest (and 19 percent equity interest) in Eken Industri & Handel AB from the Sparta savings bank. Hexagon soon raised its voting shares to a 50.1 majority.

At the time of its acquisition by Hexagon, Eken Industri had four divisions: communications equipment, which made antennas for mobile phones and radios; industrial automation; building and interior design; and vehicles, which included Bilmo of Lund, Sweden's largest agent for Volkswagen automobiles.

When it bought into Eken, Hexagon had controlling interests in three other companies, including Bruces Mekaniska Verkstad AB, a maker of ships' hulls; Diana Control; and a conference center. These three together had revenues of about SEK 150 million a year.

Eken Industri bought Bruces Shipyard, Diana Control, and Dacke Hydraulik from Hexagon in August 1993 for about SEK 50 million. It also paid SEK 4 million for the Hexagon name, and was officially renamed Hexagon AB on October 28, 1993.

Hexagon AB's estimated annual sales of SEK 1.4 billion in 1994 nearly doubled within a couple of years. It was a busy acquirer, but also sold off about ten businesses from 1993 to 1997. In April 1994 Hexagon bought Gislaved Gummi AB. Gislaved produced rubber components and was a global market leader in plate heat exchanger gaskets. It had annual sales of SEK 175 million and employed 275 people. A few months later, Hexagon acquired Johnson Metall Group from Outokumpu Copper Oy.

Acquisitions for 1996 included those of SwePart AB, which added to Hexagon's Niche Manufacturing business area, and refrigeration specialist AKA Industriprodukter AB, part of Industrial Components and Systems, which also included Dacke Hydraulik and flow technology company Gustaf Fagerberg Holding. AKA had revenues of about SEK 770 million a year. The third business area was Industrial Food Technology, consisting of Norfoods (which was made up of R Lund-berg and the newly acquired LG Fredriksson International). Hexagon divested the Bruces shipyard in January 1997, while selling off most of its majority stake in Svedbergs.

Part of Hexagon's stated focus was on wholly owned subsidiaries that complemented other units. Its subsidiaries traded mostly within the Nordic countries, though some industrial products were sold as far as Germany, the United States, and Russia.

NEW FOCUS FOR 2000 AND BEYOND

In 1998, Melker Schörling acquired the controlling interest in Hexagon from Torbjörn Ek and became the group's new chairman. A new management team was installed in 2000 as the group set out to refocus on its core strengths. The new standard was earnings per share growth of at least 15 percent a year. The Norfoods division was sold off to a private equity fund (Segulah II) and a new business area was created for wireless companies, including Moteco AB. AKA's SEK 314 million refrigerator business had been sold in 1999, as was a fire door company Robust Staldorrar RSD AB.

Toward the end of 2000, Hexagon began a major acquisition, buying the metrology, or measuring technology, business of Brown & Sharpe Manufacturing Co. for about $170 million. The unit had annual sales of $321 million, and represented most of Brown & Sharpe's revenues. Brown & Sharpe dated back to 1833 and was a Rhode Island machine tools institution. Its employment had peaked at 11,000 during World War I. At the time of the sale, it was technically in default on debts of $77 million after losing $43 million in 1999. For its part, Hexagon was thriving, with sales exceeding SEK 5 billion in 2000. Included in the Brown & Sharpe acquisitions was DEA S.p.A., a leading Italian metrology company that dated back to 1963.

There was more dealmaking in 2001. Early in the year, Hexagon sold AKA Industriprodukter and Gustaf Fagerberg to Indutrade AB, and its JMBC unit underwent a management buyout. It bought Polarteknik PMC Oy AB, a tiny Finnish producer of pumps and valves. Engineering and Automation business areas were established, followed by the creation of Hexagon Metrology a few months later. Hexagon ended the year by selling off its Wireless business area to Finland's Perlos Corporation. Wireless then had 185 employees in Sweden, Asia, and the United States and had annual revenues of nearly SEK 100 million.

Brown & Sharpe's software unit, Xygent Inc., was acquired in 2002. Hexagon also bought out a supplier of software used by Brown & Sharpe's machinery called Wilcox and Associates Inc. Hexagon was shopping for other metrology businesses as well, such as the contact measurement unit of Newport Corporation.

COMPANY PERSPECTIVES

It is our firm belief that no financial organisation can afford to be an institution. Therefore Hexagon's ultimate strategic objective is to make money for its owners. Hexagon is a listed company. Being a listed company means that your share price will be affected by, not only your own financial performance, but also by the general trend in the capital market. We believe that the best guarantee to secure and enrich our shareholders is to have a consistent and high growth of Hexagon's earnings per share. Our most important strategic objective is to achieve an earnings per share growth of at least 15 per cent per annum. This objective should always guide our actions.

Other notable acquisitions in 2002 included the Rissa, Norway plant of hydraulic cylinders producer Cylinderservice A/S, and Italy's MIRAI S.R.L., a small company that made software for measuring large sheet metal parts.

In April 2003 the Polymers business area was formed from Gislaved Rubber Group (once part of Engineering), which had bought German rubber compounding company GPD Technology GmbH the previous summer. Product lines included heat exchanger gaskets, extrusions, and rubber and plastics wheels. It had operations in Sri Lanka (Elastomeric Piliyandala) making lower cost bulk products. Sweden's Stellana AB was another part of Polymers. The May 2004 acquisition of the Thona Group of Belgium made the new group a global leader in the polymer compounds market. Thona, which had been established in 1991, brought with it plants in the Czech Republic and North America. Hexagon acquired the U.S.-based polyurethane wheel business of Trostel SEG Inc. in 2005

The Measurement Technologies unit was augmented in February 2004 by the acquisition of Sheffield Automation L.L.C.'s coordinate measurement machines business, which was based in Wisconsin and had an estimated $17 million in annual sales. The metrology business of Korea ErFa Systems Eng. Co. was added the next month, and Romer S.A. of France and Romer Inc. of the United States followed in the summer of 2004. The next year, the company's Italian measuring technology companies were renamed Hexagon Metrology.

Sales were SEK 8.26 billion in 2004. Hexagon sold off its Automation business area in July 2005. Segulah Nordic II AB was the buyer. The group bought Leica Geosystems Holdings S.A. in October 2005, besting a $1 billion offer from U.S. technology group Danaher Corporation. Hexagon subsequently began listing its shares on the SWX Swiss Exchange (they were already traded in Stockholm).

PRINCIPAL SUBSIDIARIES

Brown & Sharpe Precizika (Lithuania); Hexagon Automation AB; Hexagon Foervaltning AB; Hexagon Holdings Inc. (United States); Hexagon Metrology AB; Hexagon Polymers AB; Johnson Industries AB; Johnson Metall AB; Kramsten Food And Drink Suppliers AB; Megufo AB; Outokumpu Nordic Brass AB; PMC Technology A/S (Denmark); Polarteknik PMC (Finland); Roeomned AB; Swepart AB; Swepart Transmission AB; Tecla AB.

PRINCIPAL DIVISIONS

Engineering; Measurement Technologies; Polymers.

PRINCIPAL COMPETITORS

Carl Zeiss IMT Corporation; Mitutoyo America Corporation; Nikon Instruments Inc.; Tomkins PLC.

KEY DATES

1975:
Eken Industri & Handel AB is launched.
1992:
Hexagon development group acquires control of Eken Industri and Handel AB.
1993:
Eken is renamed Hexagon AB.
1994:
Hexagon buys rubber components manufacturer Gislaved Gummi AB.
1998:
Melker Schörling acquires controlling interest in Hexagon from Torbjörn Ek.
2000:
Hexagon refocuses on market-leading businesses, and begins the acquisition of the Brown & Sharpe metrology business.
2001:
The Wireless business area is divested.
2002:
Hexagon buys Brown & Sharpe's software unit.
2003:
A new Polymers business area is formed from Gislaved Rubber Group.
2004:
The acquisition of Belgium's Thona Group makes the Polymers unit a world leader; the Romer metrology businesses are acquired.
2005:
Automation is divested; Leica Geosystems is acquired.

FURTHER READING

"Atle Takes Over Refrigerator Company," Nordic Business Report, March 15, 1999.

Dusharme, Dirk, "Emerging Metrology Technologies," Quality Digest, June 2003.

"Eken to Buy Hexagon Units, Change Name," Dagens Industri, August 12, 1993, p. 20.

"Gislaved Sold to Hexagon," European Rubber Journal, April 17, 1994, p. 2.

"Hexagon AB Acquires Italian Sheet Metal Applications Developer MIRAI Srl," Nordic Business Report, October 4, 2002.

"Hexagon AB Sells Fire Door Company," Nordic Business Report, May 31, 1999.

"Hexagon Acquires Finnish Engineering Firm," Nordic Business Report, November 15, 2001.

"Hexagon Acquires 49.9% Voting Stake in Eken," Svenska Dagbladet, December 15, 1992, p. 1.

"Hexagon Acquires Wilcox and Associates," Nordic Business Report, September 13, 2001.

"Hexagon Acquires Xygent to Sell Its Measuring Technology," Nordic Business Report, August 20, 2002.

"Hexagon Automation Acquires Hydraulic Cylinders Manufacturing Plant in Norway," Nordic Business Report, September 26, 2002.

"Hexagon Seeks Institutional Backers," Svenska Dagbladet, June 13, 192, p. 7.

"Hexagon Still Looking for Acquisitions; Major Deal in Nano Sector Possible," AFX International Focus, October 10, 2005.

"Incentive Sells AKA Industriprodukter," Reuters News, May 6, 1996.

"Investment AB Eken of Sweden Is to Merge Its Operations with Those of Its Subsidiary Eken Industri AB," Svenska Dagbladet, May 6, 1987, p. 1.

"Outokumpu Sells Johnson Metall Group to Hexagon," Reuters News, September 30, 1994.

"Perlos Acquires Swedish Mobile Phone Antennas Maker Moteco," Nordic Business Report, December 20, 2001.

Stape, Andrea L., "Parent of North Kingstown, R.I., Toolmaker Buys Wisconsin Manufacturer," Providence Journal Bulletin (Rhode Island), February 28, 2004.

, "Rhode Island-Based Software Unit of Former Manufacturing Firm Is Sold," Providence Journal Bulletin (Rhode Island), August 21, 2002.

"Swedish Hexagon Buys Metrology Operations from Korea ErFa Systems," Swedish News Digest, March 9, 2004.

Tate, Pamela, "Brown & Sharpe to Sell Metrology Unit for $160M," Dow Jones News Service, November 17, 2000.

Vallejo, Maria P., "Newport Completes Sale of U.S. Metrology Assets," Dow Jones News Service, June 3, 2002.

White, Liz, "Hexagon Buys Italian Wheel Maker, Expands," European Rubber Journal, October 1, 2004, p. 2.

, "Hexagon Buys Thona, Takes European Top Spot," European Rubber Journal, May 1, 2004, p. 4.

, "Hexagon Forms Polymer Unit, Aims for Growth," European Rubber Journal, June 1, 2003, p. 5.

, "Hexagon Polymers Has Major Plans for Growth: Acquisition of GFD Adds to Hexagon's Sales; Further Expansion and Investments Are Likely," European Rubber Journal, October 2003, p. 2.

Wyss, Bob, "Rhode Island Industrial Tools Giant Sells Assets to Swedish Company," Providence Journal (Rhode Island), November 18, 2000.

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