Elliott discloses $7.6b Honeywell stake, calls for split
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The news: Elliott Investment Management disclosed it has built a stake worth over USD5 billion ($7.64 billion) in Honeywell International and is urging the North Carolina-based conglomerate to split its aerospace and automation units.
The numbers: Elliott disclosed a USD5 billion stake in Honeywell on Tuesday morning (early morning Wednesday AEDT), its largest investment in a single stock, and urged the company to split into two independent entities: Honeywell Aerospace and Honeywell Automation.
The firm, now among Honeywell's top five shareholders, asked Honeywell’s board to consider the proposal, projecting such a split could yield a 51-75% share price increase over two years.
The industrial giant, valued at USD146 billion, has been involved in strategic acquisitions and non-core divestitures under CEO Vimal Kapur, who took over last year.
Honeywell’s stock, up 7.4% year-to-date, rose as much as 7.78% to USD242.77 following the news.
The context: Last month, Honeywell reported softer demand for its smart-energy products and cut its full-year sales forecast.
Elliott said Honeywell's structure has hindered its operational and financial performance, citing its share underperformance against peers and the broader market over the last five years.
Elliott highlighted potential operational and valuation benefits, using examples from past conglomerate breakups like GE and United Technologies.
The activist investor said Honeywell’s conglomerate structure has led to “uneven execution, inconsistent financial results and an underperforming share price.”
A spokesperson for Honeywell, which recently announced plans to spin off its advanced materials unit, acknowledged Elliott’s announcement and said it looked forward to “engaging with Elliott and obtaining its input.”
What they said: “Honeywell remains a world-class company with market-leading assets. However, over the last five years, uneven execution, inconsistent financial results and an underperforming share price have diminished its strong record of value creation,” Elliott partner Marc Steinberg and managing partner Jesse Cohn said in a letter to Honeywell’s board.
“We believe these challenges have a clear cause and a straightforward solution: The conglomerate structure that once suited Honeywell no longer does, and the time has come to embrace simplification."
In a separate statement, Elliot said its "position in Honeywell is one of Elliott's largest investments to date, reflecting our strong conviction in the unique value creation opportunity present at the Company today."
A spokesperson for Honeywell said in a statement that, “although Elliott had not made us aware of their views prior to today, we look forward to engaging with the firm to obtain their input.”
The sources: Elliott letter to Honeywell’s board , Elliott statement , Bloomberg , The Wall Street Journal , Reuters
