Honeywell announced a strategic split into three independent companies: Honeywell Automation, Honeywell Aerospace, and Advanced Materials. This decision follows significant pressure from activist investor Elliott Management, aiming to foster tailored growth and enhance shareholder value. The separation is expected to take place by 2026, with each entity focusing on specific markets such as automation solutions and aerospace supply.
Honeywell, a leading aerospace and industrial firm, announced its plan to separate into three independent, publicly traded companies in response to pressure from investors. The new companies will be Honeywell Automation, Honeywell Aerospace, and the spinoff of Advanced Materials previously disclosed. This decision aims to establish a foundation for focused growth strategies, ultimately generating greater shareholder and customer value.
The division is expected to conclude by the second half of 2026, with the separation of Honeywell Automation and Honeywell Aerospace being a non-taxable event for shareholders. In tandem, the Advanced Materials spin-off is slated for completion by late 2025 or early 2026.
Honeywell Automation will focus on providing automation solutions for factories and warehouses, addressing the challenges posed by moderated e-commerce demand post-pandemic. In contrast, Honeywell Aerospace will concentrate solely on aerospace supplies, drawing significant revenue from major clients such as Boeing and Airbus.
The new Advanced Materials entity is positioned to specialize in sustainability-focused specialty chemicals and materials, reflecting a substantial revenue stream of nearly $4 billion last year. This diversification aligns with current market trends emphasizing environmental responsibility.
The strategic split was propelled by activist investor Elliott Management, which acquired a $5 billion stake in Honeywell. Elliott Management argued that the company needed to restructure due to its stock performance lagging behind the broader market, highlighting a 7.7% increase in Honeywell shares versus a 26.6% market gain until mid-November. Notably, this is not the first instance of activist pressure, as past attempts in 2017 to separate divisions also emerged.
In summary, Honeywell’s decision to split into three distinct companies reflects a strategic response to investor pressure and aims to enhance shareholder value. Creating Honeywell Automation, Honeywell Aerospace, and the standalone Advanced Materials will allow each entity to pursue specialized growth strategies and improve operational focus. The restructuring also signifies Honeywell’s commitment to adapting its business model in a changing market environment.
Original Source: www.usatoday.com
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