Honeywell announced Thursday, as one of the few remaining US conglomerates in business, that it would be split up into three independent companies.
The decision was made after Elliott Management put pressure on the company for months. They took a stake of $5 billion and advocated a split.
Honeywell expects the move to improve its agility and unlock value for shareholders.
Aerospace and Automation Businesses Separated
In addition to its previously announced spin-off of advanced materials, the company is also separating its aerospace and automated businesses.
Honeywell has a large aerospace division, accounting for 40 percent of its total revenues. It serves customers like Boeing, Airbus and the US Government.
Honeywell is now in a position to join other giants in manufacturing, such as General Electric, Alcoa and 3M who made similar decisions in recent times to split up their conglomerates.
Elliott Management and its Board of Directors have been in contact with the company.
Honeywell made the decision to separate its advanced materials, aerospace and automation businesses after intensive discussions with their board. Elliott Management had also been pressing for a more streamline structure.
Elliott was concerned about Honeywell’s performance in relation to the wider market. It argued the company would be able unlock more value for its shareholders if it were split into smaller, focused companies.
Vimal Kapur, who became CEO of Honeywell in 2023 has led a major transformation, selling off non-core assets, restructuring the business to concentrate on Honeywell’s key industries, aviation, automation and energy.
Honeywell, under his leadership has divested and acquired several companies to streamline its business and focus its efforts.
Honeywell is repositioning itself to grow in a highly competitive industry sector.
Kapur said in a press release that the three companies would be able to follow tailored growth strategies, unlocking significant value for customers and shareholders.
Separation is expected to complete in the second quarter of 2026
Honeywell expects to complete the separation of its aerospace and automation business in 2026. The spinoff of Honeywell’s advanced materials is likely to conclude by the end of 2018 or the beginning of 2019.
The timeline provides investors and analysts with a better roadmap of how restructuring will take place in the next few years.
Honeywell stock fell nearly 2.5% in pre-market trading despite the positive outlook. This reversed earlier gains.
The company announced that they expect to have lower sales and profits in 2025. This raised concern about the financial effects of the possible breakup.
Many see the split as necessary in light of the increasing demand from investors for greater transparency and an improved growth strategy.
Honeywell was not the only conglomerate that has split up in recent years. General Electric’s and Alcoa’s similar moves reflect the trend of large corporations being under pressure to streamline their structure and be more agile.
The 2021 General Electric decision to split into three separate companies focused on health care, aviation and energy, was seen by many as an important shift in American industry.
As the digital economy and its competition grow, analysts noted that companies with too much diversity and size may find it difficult to compete against more agile and specialized competitors.
Honeywell’s restructuring is part of a larger trend where conglomerates focus on core competencies and shed non-core business.
Honeywell, for example, will focus on aviation, automation and energy, which are all expected to grow significantly in the next few years.
Honeywell’s Aerospace division has been in high demand, as airlines struggle to meet the shortage of jets. This is driving sales up for parts and services aftermarket.
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