Well, it’s finally done.
Intergraph Corporation today announced it has signed a definitive agreement to be acquired by Hexagon AB in a transaction valued at approximately $2.125 billion.
For a quick refresher, Intergraph was taken private in 2006 by an investor group led by Hellman & Friedman and Texas Pacific Group (now TPG). The transaction was valued at approximately $1.3 billion.
Since then, Intergraph has undergone a serious retooling, with increased focus on product development rather than the intellectual property protection litigation that had distracted management. Revenue grew from $632 million in 2006 (before the acquisition) to a high of $808 million in 2008, falling back to $770 million last year. But profitability improved even more, with gross profit growing from 53% to nearly 57% over the same period.
Intergraph operates in two units: Process, Power & Marine (PP&M) and Security, Government & Infrastructure (SG&I). PP&M is one of the world’s leading providers of engineering software for the design, construction and operation of plants, ships and offshore facilities. In 2009, PP&M had revenue of about $315 million, up from $300 million in 2007 (but reaching a high of $340 million in 2008). SG&I provides geospatially-enabled solutions to the defense and intelligence, public safety and security, government, transportation, photogrammetry, utilities and communications industries. SG&I had revenue of $400 million in 2007, reached a high of $470 million in 2008 and reported revenue of over $450 million in revenue in 2009.
It would appear that Hellman & Friedman and TPG did quite well with the deal, earning a 60% premium on their original investment (after perhaps taking profit out during the time of ownership).
Hexagon AB is a publicly traded Norwegian company that supplies “systems for measurement of objects in one, two or three dimensions. The measurement systems measure with great precision and rapidly provide access to large amounts of measurement data.” Hexagon has more than 7,500 employees in 39 countries and net sales of about 12 billion Swedish Krone (roughly $1.5 billion) with a target to grow to 20 billion SEK in fiscal 2011 by organic growth and acquisitions. The Intergraph acquisition gets them much of the way to the new target.
According to its investor relations website, Hexagon’s vision is pretty clear: “to be a market leader, ranking number one or number two, in each strategic business in order to generate growth and shareholder value… to develop and market leading technologies and services to measure in one, two or three dimensions, to position and update objects and to time processes… to be the most cost-efficient and innovative supplier, have the best management skills in the business and short and rapid decision processes.”
Intergraph will operate as a separate Hexagon division and retain the Intergraph name and branding and continue to support its existing markets. According to the press release, “Intergraph will become Hexagon’s core software platform” (although it’s unclear exactly which of Intergraph’s many technologies is referred) and will continue to provide differentiated and vertically-focused software solutions to its core industries.
"The acquisition of Intergraph to become Hexagon’s core software platform provides excellent growth prospects and synergies within our portfolio of measurement technologies and is fundamental to our company’s growth strategy," said Ola Rollen, CEO and president of Hexagon AB. "We believe Intergraph will significantly expand our addressable market opportunity, creating additional shareholder and customer value through the addition of a well-known and complementary software company."
Hexagon will finance the purchase through “bank facilities” and will seek to raise a further $850 million from a share sale to existing investors after the transaction has been completed. Pending regulatory approvals, as well as satisfaction of other customary closing conditions, the transaction is expected to be completed in the third or fourth quarter of 2010.