Honeywell will split into three separate companies: Honeywell Automation, Honeywell Aerospace, and Advanced Materials, following pressure from activist investor Elliott Management. The separation is expected to be tax-free for shareholders and completed by 2026, with a focus on enhancing growth strategies and maximizing shareholder value. This move arises after Honeywell’s stock underperformed in comparison to the market, despite being a significant player in the aerospace industry.
Honeywell, a major player in the aerospace industry, has announced its decision to separate into three individual, publicly traded companies. This strategic division includes the formation of Honeywell Automation, Honeywell Aerospace, and a previously declared spin-off of Advanced Materials. According to Vimal Kapur, Chairman and CEO, this restructuring aims to enhance growth strategies and maximize value for shareholders and customers.
The division is set to be completed by the latter half of 2026, with the separation being tax-free for shareholders. The spin-off of Advanced Materials is anticipated to finalize by late 2025 or early 2026, marking a significant shift for Honeywell’s corporate structure.
The three distinct companies will focus on specialized operations. Honeywell Automation will deliver automation solutions to improve mechanization in factories and warehouses, responding to the evolving e-commerce demands.
Honeywell Aerospace will operate as a dedicated aerospace supplier, representing the largest revenue segment for Honeywell, contributing 40% of total earnings in 2024 with Boeing and Airbus as key clients.
Furthermore, Advanced Materials will concentrate on sustainability, specializing in chemicals and materials, generating nearly $4 billion in revenue the previous year. This division will emphasize eco-friendly practices in its operations.
This restructuring follows significant pressure from activist investor Elliott Management, which invested $5 billion in Honeywell and urged the company to separate its divisions. The call for a split was fueled by Honeywell’s stock performance lagging behind the broader market, gaining only 7.7% in 2024 compared to the market’s increase of 26.6% during the same timeframe.
This is not the first time Honeywell has encountered external calls for a breakup; in 2017, it had successfully resisted similar pressures from activist investor Daniel Loeb’s Third Point, who advocated for separating the aerospace division.
In conclusion, Honeywell’s announced split into three independent companies—Honeywell Automation, Honeywell Aerospace, and Advanced Materials—highlights a strategic response to investor pressures aimed at optimizing growth and shareholder value. The plan is designed to enhance operational focus and sustainability while positioning each entity for tailored growth in their respective sectors. As the separation progresses, it will be interesting to observe how these changes impact Honeywell’s market performance and corporate dynamics.
Original Source: www.usatoday.com
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