Hexagon Composites Acquires SES: A Strategic Move with Upside Potential in European CNG Systems

The acquisition of SES Composites by Hexagon Composites marks a pivotal step in consolidating Hexagon's leadership in clean energy infrastructure, particularly in compressed natural gas (CNG) storage systems. This transaction, valued at €11.7 million enterprise value, is not merely a financial maneuver but a strategic play to amplify synergies, unlock operational efficiencies, and capitalize on undervalued share consideration. For investors, the deal presents a compelling entry point into a sector poised for growth as Europe transitions to greener energy solutions.

Strategic Synergy: Building a Stronger CNG Ecosystem

Hexagon's acquisition of SES directly addresses its ambition to dominate the European CNG market. SES, a specialist in high-pressure composite cylinders for natural gas storage, complements Hexagon's existing portfolio of hydrogen and biogas storage solutions. The combined entity will benefit from shared supply chain resources, overlapping customer bases in industrial and automotive sectors, and cross-selling opportunities. For instance, SES's expertise in lightweight composite cylinders can enhance Hexagon's ability to deliver cost-effective CNG distribution systems—a critical component for decarbonizing transportation.

The strategic rationale is further bolstered by the operational efficiencies anticipated post-merger. By consolidating production lines and streamlining procurement, Hexagon aims to reduce costs and improve margins—a key factor in its 2025 EBITDA growth projections.

Financial Forte: EBITDA Growth and Undervalued Share Consideration

The financial details of the transaction underscore its attractiveness. SES's pro-forma 2024 revenue of €28 million and EBITDA of €0.7 million are expected to jump to €33 million and €2 million in 2025, driven by a robust order backlog and rising demand for CNG infrastructure. This 185% EBITDA improvement (from €0.7M to €2M) positions the acquisition as accretive to Hexagon's earnings, particularly when considering the low upfront cash outlay.

The highlights the deal's valuation upside. At just 5.85x trailing EBITDA, this multiple appears compelling compared to peers in the industrial gases and composites sector, which often trade at 8–12x. The use of shares (drawn from treasury stock, avoiding dilution) to settle part of the purchase price further strengthens the case for undervaluation, as the shares given to Worthington Enterprises reflect a conservative valuation of Hexagon's equity.

Hexagon Purus' Stake Impact: A Catalyst for Further Value

The transaction's reduction of Hexagon's ownership in Hexagon Purus—a subsidiary focused on hydrogen storage—to 33.8% could unlock hidden value. While the immediate focus is on integrating SES, the trimmed stake in Purus may signal a strategic reallocation of resources toward core competencies. Investors should monitor potential spin-offs or partnerships involving Purus, which could provide additional upside.

Investment Thesis: Act Now on EBITDA Catalysts and Synergy Visibility

Hexagon's acquisition of SES is a textbook example of value creation through strategic M&A. The 2025 EBITDA growth trajectory, combined with the low valuation multiple and operational synergies, positions the stock for a re-rating. Key catalysts for investor action include:

1. Synergy realization: Demonstrating cost savings and margin expansion by mid-2026.
2. Hexagon Purus' stake: Potential monetization or strategic realignment.
3. European clean energy policies: Regulatory tailwinds for CNG infrastructure investments.

Conclusion: A Prudent Bet on Clean Energy Infrastructure

Hexagon Composites' acquisition of SES Composites is a shrewd move to solidify its position in the booming CNG storage market. With a compelling valuation, clear EBITDA upside, and minimal dilution, the deal offers investors a rare opportunity to participate in a sector critical to Europe's energy transition. As the market digests the synergies and growth prospects, Hexagon's shares are primed for appreciation. For investors with a 12–18 month horizon, this is a compelling entry point.

Act swiftly, as the window to capitalize on this undervalued opportunity may narrow once the market fully appreciates the strategic and financial merits.