In April 2026, Hexagon AB approved the separation of Octave Intelligence plc into an independent publicly traded company via a Lex Asea (i.e., tax-fee) distribution of all (i.e., 100%) Octave shares to Hexagon shareholders. Shareholders will receive one Octave share for every ten Hexagon shares held, with the record date set for May 22, 2026. Octave SDRs (or Swedish Depository Receipts) are expected to trade on Nasdaq Stockholm under “OCTV SDB” beginning on May 25, 2026, while Octave Class B shares are expected to begin regular-way trading on Nasdaq New York under “OCTV” on May 28, 2026. Octave will be headquartered in Madison, Alabama, and led by CEO and Director, Mattias Stenberg, the current president of Hexagon’s Asset Lifecycle Intelligence and Safety, Infrastructure, & Geospatial divisions. The separation aims to create a focused software and SaaS company while simplifying Hexagon’s portfolio and improving valuation transparency, addressing a structural conglomerate discount that has affected Hexagon’s valuation in recent years.
The spin-off, in our view, separates two businesses with distinct operating models and investor profiles. On one hand, Octave will comprise Hexagon AB’s Asset Lifecycle Intelligence, Safety, Infrastructure & Geospatial, ETQ, and Bricsys businesses, forming a scaled enterprise software platform focused on operational intelligence for asset-intensive industries. The business benefits from exposure to several long-term structural themes, including digitalization of industrial assets, increasing operational complexity, digital twins, predictive analytics, industrial AI, and infrastructure modernization. Growth is expected to be driven by recurring revenue, platform investments, SaaS migration, AI-enabled workflow integration, cross-/up-sell opportunities, and selective M&A. Transition from perpetual licenses toward subscription and SaaS is likely to continue creating near-term pressure on reported growth and margins, as revenue recognition shifts and standalone cost structures begin to normalize. Over the medium term, management targets 10%+ ARR growth, 6%-8% organic revenue growth, an adjusted operating margin of ~30%, and free cash flow margin expansion to 23%-24%; emphasis is on durable ARR growth, cash conversion, and execution consistency rather than platform narratives alone.
By contrast, Hexagon will be a more focused industrial technology company centered on precision measurement, positioning, manufacturing intelligence, infrastructure, geospatial, autonomous solutions, and robotics. Long-term tailwinds include industrial automation, infrastructure modernization, smart manufacturing, and autonomous operations across a range of end markets such as mining, aerospace & defense, construction, and manufacturing. In particular, Autonomous Solutions increasingly represents the primary strategic growth engine within the portfolio, combining higher margins, stronger growth, and increasing exposure to autonomy-related applications. That said, parts of RemainCo’s portfolio remain exposed to cyclical industrial and construction demand, particularly within Manufacturing Intelligence and Geosystems. Demand recovery across construction, automotive, and agriculture remains uneven, while China-related weakness and slower industrial activity could continue to weigh on near-term growth. Successful delivery of margin expansion targets will likely depend on the execution of restructuring initiatives, operating leverage realization, and commercialization of newer robotics and autonomy offerings. Management targets 4%-6% average annual organic revenue growth, a 24%-26% EBITAC margin, and 90%-100% EBITAC cash conversion over FY 2026–2030; focus is on organic innovation, industrial automation, bolt-on acquisitions, and disciplined shareholder returns.
For our part, we value Hexagon AB on a sum-of-the-parts (SOTP) basis, applying peer-benchmarked EV/EBIT multiples using Bloomberg consensus for FY 2027E. Following the spin-off, Octave is valued at ~EUR 5.8 billion using a 14x multiple, while RemainCo is valued at ~EUR 20.4 billion, supported by a premium 17x multiple. Adjusting for net cash, pension liabilities, and minority interest results in a combined equity value of ~EUR 26.2 billion, or ~SEK 106.32 per share, 6.5% higher than the market price as of May 19, 2026. In effect, Hexagon’s current valuation suggests that investors are already pricing in the strength of the Octave business and benefits of the separation, with seemingly limited incremental upside at this stage. Hence, our initial rating is Neutral (although we will monitor shares to identify attractive potential entry points).