Hunting PLC's FES Acquisition: A Strategic Leap into Subsea and Renewables

The acquisition of Flexible Engineered Solutions (FES) by Hunting PLC on June 24, 2025, marks a pivotal moment in the company's evolution toward its 2030 Strategy goals. By integrating FES's proprietary subsea technologies into its Subsea Technologies division, Hunting has positioned itself to capitalize on growing demand for deepwater and floating offshore wind infrastructure. This move not only enhances Hunting's technical capabilities but also creates compelling opportunities for margin accretion and strategic growth.

Strategic Synergies: Technology, Markets, and Customers
The acquisition delivers three critical synergies:

1. Technology Access: FES's patented solutions, such as Diverless Bend Stiffener Connectors (DBSC) and Turret Systems, are mission-critical for subsea oil and gas infrastructure and renewable energy projects. These technologies allow Hunting to expand into high-margin markets like floating offshore wind, where FES's DBSC is already being adapted.
2. Cross-Selling Opportunities: FES's products complement Hunting's existing subsea products, enabling bundled sales to supermajors and energy service firms in key regions like Brazil, Southeast Asia, and West Africa. This integration reduces customer acquisition costs and strengthens long-term revenue visibility.
3. Geographic Diversification: FES derives over 50% of its revenue from international markets, aligning perfectly with Hunting's global expansion plans. The combined entity now has a stronger foothold in emerging deepwater and renewable energy hubs.

Margin Accretion: Strong Financials Back the Play
The acquisition is immediately earnings accretive, with FES contributing £6.7m in adjusted EBITDA in 2024. Hunting's cash-neutral approach—funded entirely by existing resources—leaves it with £40m in cash and bank facilities, maintaining financial flexibility.

• Cash Flow Strength: FES's order book of £11.8m at close, combined with a tender pipeline exceeding £100m, suggests robust near-term cash generation.
• Operational Stability: FES's 46-employee team and UK facilities will remain intact, with senior management committed to staying for at least 12 months, ensuring seamless integration.

Capital Allocation: A Focus on Strategic Growth
Hunting has announced a review of its capital allocation priorities, with updates expected by July 9, 2025. While specifics remain pending, the signals are clear:
- Growth Over Dividends: With £40m in cash, Hunting is likely to prioritize reinvestment in subsea technologies and renewable energy opportunities over shareholder returns.
- M&A Appetite: The acquisition underscores Hunting's willingness to pursue bolt-on deals that align with its 2030 Strategy. FES's IP in floating wind solutions could catalyze further moves in this space.

Investment Implications
The acquisition is a disciplined move that aligns with Hunting's long-term value creation goals. Key takeaways for investors:
- Margin Expansion: FES's high-margin products should lift Hunting's EBITDA margins over time.
- Catalysts Ahead: The July 9 trading update and upcoming capital allocation policy announcement will provide clarity on Hunting's growth roadmap.
- Risk Factors: Execution risks in integrating FES's operations and the cyclical nature of offshore energy markets remain.

For now, Hunting's stock appears attractively priced, given the accretive nature of the deal and its strengthened subsea portfolio. Investors should watch for Hunting's July update to confirm management's commitment to strategic reinvestment. In a sector where deepwater and renewable energy projects are on the rise, this acquisition positions Hunting to capitalize on secular tailwinds.

Conclusion
The FES acquisition is a strategic win for Hunting, combining technological leadership, geographic reach, and financial discipline. With a clear path to margin expansion and a capital allocation review in the works, Hunting is well-positioned to deliver sustained growth. For investors, this is a story worth watching closely—especially as the company moves into the renewable energy frontier.