Author: Shivansh Tiwary
(Reuters) – Honeywell (NASDAQ:) said on Monday it is considering a plan to separate its high-margin aerospace business, a move backed by activist investor Elliott Investment Management, which is pushing for the company to be broken up.
The company, one of the last surviving U.S. conglomerates, has been on a deal-making spree this year under CEO Vimal Kapur as it focuses on the areas of automation, aerospace and energy.
But the company’s shares have performed weaker this year, drawing the attention of Elliott, who took a $5 billion stake in the company and pushed for a separation of its aerospace and automation businesses.
On Monday, Honeywell said its board has made “significant progress” in its review of strategic alternatives and the company will report updated fourth-quarter results. Shares rose 3.2% before the bell.
Elliott responded, welcoming the company’s announcement.
“We believe that the portfolio transformation led by Vimal and his team is the right course for Honeywell and we look forward to the upcoming completion of the review and to supporting Honeywell in implementing the necessary steps to achieve full value,” the activist investor said.
Analysts say the standalone aerospace company, which is Honeywell’s largest unit and whose clients include Boeing (NYSE:) and Airbus, could be valued at between $90 billion and $120 billion, including debt.
The aerospace unit, which builds everything from engines to cockpit components, has benefited from an enhance in jet production over the past few years, although supply chain disruptions have hurt the company’s ability to meet some of that demand.
The boom in jet production will continue in the coming years due to record backlogs at aircraft manufacturers, and the shortage of aircraft will enhance the need for repairs. In 2023, Honeywell’s aerospace business posted revenue of $13.62 billion, of which 46% was accounted for by its commercial repair and spare parts business.
The potential spin-off will echo a similar move General Electric (NYSE:) in 2021. As of Friday, GE’s aerospace business had a higher market value than Honeywell as a whole.
In November, Honeywell revealed it would sell its personal protective equipment business to Protective Industrial Products for about $1.33 billion in cash.
As part of the broader shift, the conglomerate also bought Carrier’s security business for $4.95 billion and acquired aerospace and defense company CAES Systems for $1.9 billion.
For the first nine months of 2024, Honeywell’s aerospace business reported revenue of $11.47 billion, representing approximately 40% of the company’s total sales for the period.
