HMS Networks acquires Red Lion Controls and significantly expands its presence in North America
20 December 2023
HMS Networks AB, a global provider of industrial information and communication technology, has entered into a binding agreement with Spectris Group Holdings Limited to acquire the Red Lion Controls business, a well-established US-based provider of industrial automation solutions.
The acquisition of 100 percent of the shares in Red Lion Controls Inc. and Red Lion Europe GmbH, as well as certain assets in other jurisdictions ("Red Lion"), significantly expands HMS' presence in the North American market and complements HMS´ offering.
Summary of the acquisition
HMS has entered into a binding agreement to acquire Red Lion for a cash consideration of USD 345 million (approximately SEK 3,600 million), on a cash and debt-free basis (Enterprise Value). Red Lion is a well-established US-based provider of industrial automation solutions with an innovative product portfolio with premium brands.
The acquisition will significantly strengthen HMS' presence in North America and enable cross-selling of both HMS' and Red Lion's products through their respective market channels. The combination of HMS and Red Lion had annual sales exceeding SEK 4.4 billion, during the twelve-month period ending on September 30, 2023, with an adjusted EBIT margin of approximately 24 percent. The acquisition is expected to close during the first half of 2024, subject to customary regulatory approvals and closing conditions.
Says Staffan Dahlström, CEO of HMS, "We are very happy to welcome Red Lion into the HMS Networks family. The companies are a great match when it comes to products, geographic presence, and cultural aspects. The combination of Red Lion´s product portfolio, which is complementary to HMS' offering and has limited overlap, and the geographic match with Red Lion having a strong position in the attractive North American market, and HMS with its core markets in Europe, will generate good cross-selling opportunities.
"Red Lion's 'Access' products fit well with HMS' Anybus and Ewon product lines, while Red Lion's 'Connect' offering adds what HMS has been searching for for several years; a strong Ethernet switch offering with a strong market position. Finally, Red Lion's 'Visualize' offering brings new opportunities for HMS to explore the data visualisation offering that is becoming more and more interesting with its central role in the industrial automation environment and its ability to provide additional value on top of HMS' connectivity and network offering.
Staffan Dahlstrom and Marcel van Helten
"We are eager to start working together, to realise the synergies between the companies, and to enable each other to take the next steps on our common future journey once the transaction closes."
Strategic rationale
For HMS, it is of strategic importance to strengthen its presence in the attractive North American market and to improve its product offering range with products and offers that are specifically developed to meet the North American market demand.
The acquisition is expected to enable several cross-selling synergies of HMS and Red Lion, partly by capitalising on the different market channels. With the greatest proportion of Red Lion's sales coming from North America, through a well-developed distributor network, HMS will be able to utilise this to drive sales of HMS' gateway and remote access offering. HMS, with about 60 percent of its sales in the large automation markets in Europe and well-developed and targeted market channels, will be able to cross-sell selected parts of the Red Lion offering.
Furthermore, the acquisition is expected to have R&D and product development synergies on several parts of both HMS' and Red Lion's offerings, which will be explored further after closing of the transaction.
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