Hensoldt’s Acquisition Plans Are Badly Received by Investors

Last Updated: 16. November 2023By

For a long time, Hensoldt’s papers only went in one direction. In the 14 months following Russia’s attack on Ukraine, the stock tripled from 12 to nearly 37 euros. Since then, the stock has been consolidating, with investors particularly skeptical of the company’s recent takeover plans.

Hensoldt: The German Defense Specialist Before we get to the deal, let me introduce you to the buyer: Hensoldt is a provider of defense and security electronics. The company takes a leading role in technology and innovation in this field with sensor solutions for defense and non-defense applications.

The company develops products designed to counter a variety of threats in the areas of data management, robotics, and cyber security. The company is based in Taufkirchen near Munich. In the last fiscal year, Hensoldt, with 6,500 employees, posted a 15.8% increase in sales to 1.7 billion euros. At the same time, net profit increased by 23% to 78 million dollars.

The two largest shareholders with a blocking minority of 25.1% each are the state and the Italian defense company Leonardo.

Hensoldt takes aim at military service provider ESG Now the defense company is planning to swallow the military service provider, ESG Elektroniksystem- und Logistik-GmbH. To finance the acquisition, the MDax company plans to increase its registered capital by 10% of the basic capital. The state is involved in Hensoldt with around 25% for national security policy interests. Accordingly, the state must participate in the capital increase in order to maintain its stake at least. The planned capital increase at Hensoldt could raise around 270 million euros given the current market capitalization of the company.

ESG and Hensoldt already work together According to media reports, both companies complement each other well. Both Hensoldt and ESG supply the Bundeswehr and operate IT and electronics systems to counter drones and hacker attacks. With Hensoldt, ESG is working on the European combat aircraft project FCAS. The takeover of ESG „would be an important step for Hensoldt to become a European provider of seamlessly integrated solutions,“ the company said in a press release.

ESG with annual sales of 285 million euros ESG is currently owned by financial investor Armira Partners and, according to its own information, employs 1300 employees. Hensoldt does not yet make any concrete statements about the purchase price. Last year, the airline based just 40 kilometers away in Fürstenfeldbruck, the takeover candidate ESG, achieved sales of 285 million euros.

Order books full For the arms industry, the current economic situation is favorable. Many countries worldwide are increasing their military spending in view of the great geopolitical tensions. Germany in particular has a great need to catch up, as the Bundeswehr’s armament has been neglected for years. Therefore, the order books are full: Hensoldt is currently sitting on an order book of 5.5 billion euros.

The Hensoldt board wants to seal the deal by the beginning of December. Some points are still being clarified. In addition, the transaction must be approved by the responsible authorities.