US conglomerate Honeywell explores breakup, Elliott happy
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The news: US industrial conglomerate Honeywell is considering separating its aerospace business, which accounts for 40% of its revenue, following activist investor Elliott Investment Management’s USD5 billion ($7.88 billion) stake investment and calls for a breakup.
The context: Last month Elliott disclosed the magnitude of the stake it had amassed in the company – its largest investment in a single stock – and called for the split, saying it could increase Honeywell's share price by 75%.
In a statement, Honeywell said its board has made “significant progress” in reviewing strategic options, "including the potential separation of its Aerospace business," and will provide an update with its Q4 earnings in January.
Vimal Kapur, who was appointed CEO last year, said the company is exploring “significant transformational alternatives.” Kapur has led a deal-making spree this year including strategic acquisitions and non-core divestments as part of a shift toward automation, aviation and the energy transition.
Last month, Honeywell said it had agreed to sell its personal protective equipment business for USD1.33 billion and late last year bought Carrier’s security unit for USD4.95 billion.
The aerospace division, Honeywell’s largest by revenue and counting Boeing and Airbus as clients, could be valued between USD90 billion and USD120 billion, according to analysts cited by Bloomberg.
The unit reported USD11.47 billion in revenue for the first nine months of 2024, or about 40% of Honeywell’s total sales, benefiting from rising jet production despite supply chain issues.
What they said: "Since aligning our business this past January to three compelling megatrends – Automation, the Future of Aviation and Energy Transition – we have been moving swiftly and decisively to optimize the Honeywell portfolio to deliver superior growth and drive incremental shareholder value. At the same time, we have been evaluating more transformational changes," Kapur said in the statement.
“Honeywell is now well-positioned for significant transformational alternatives, and we are continuing our deeper, more granular exploration of their feasibility and possible timing," Kapur added. "Honeywell's Board of Directors remains committed to maximizing shareholder value creation, and any decision will be evaluated against that goal."
In a statement, Elliott welcomed Honeywell’s announcement, saying: “We believe the portfolio transformation Vimal and his team are leading represents the right course for Honeywell, and we look forward to the upcoming completion of the review and to supporting Honeywell as it implements the necessary steps to realize its full value.”
The sources: Honeywell statement, Elliott statement, Reuters, The Wall Street Journal
