Honeywell, one of America's last remaining conglomerates, announced plans to split into three independent, publicly traded companies. This move follows pressure from activist investor Elliott Management, which took a $5 billion stake in the industrial giant. Despite the announcement, Honeywell shares fell as the company forecast lower-than-expected sales and profit for 2025.
Honeywell announced on Thursday its plan to split into three independent, publicly traded companies. This move signifies the dissolution of one of America's last remaining conglomerates, coming just months after activist investor Elliott Management acquired a $5 billion stake in the industrial giant. Despite the company's announcement, shares dipped nearly 2.5% in premarket trading, reversing initial gains spurred by the news.
This decline occurred after Honeywell projected lower-than-expected sales and profit for 2025. \The company revealed its intention to separate its aerospace and automation businesses into distinct entities, complementing its previously announced spin-off of the advanced materials unit. This decision follows a trend among leading American industrial conglomerates, with 3M, General Electric, and United Technologies having undertaken similar splits in recent years. Under CEO Vimal Kapur, Honeywell has engaged in a series of acquisitions and divestments, strategically focusing on the aviation, automation, and energy sectors. \Elliott Management, whose substantial investment in Honeywell represents its largest single holding, argued for a breakup, citing the company's underperformance relative to the market. While Honeywell's stock climbed 7.7% in 2024 up to November 11, the day prior to Elliott's public disclosure of its stake, the broader market surged by 26.6% over the same period. Analysts have estimated the potential value of Honeywell's high-margin aerospace business, including debt, to fall between $90 billion and $120 billion. The aerospace sector, grappling with a scarcity of new aircraft, has witnessed a surge in demand for aftermarket services and parts, benefiting companies like Honeywell. The aerospace unit constitutes Honeywell's primary revenue generator, accounting for approximately 40% of the company's total revenue in 2024. It boasts a prestigious clientele including Boeing and Airbus, and also holds contracts with the U.S. government, providing communication and navigation systems among other services. \Honeywell had previously announced plans to spin off its advanced materials unit into a publicly traded company in October. In December, the company indicated it was considering a spinoff of its aerospace business following Elliott's pressure. The company aims to complete the separation by the second half of 2026, a process that would be tax-free for shareholders. This isn't the first instance of Honeywell facing activist pressure to dismantle the company. In 2017, it successfully resisted Daniel Loeb's Third Point, which advocated for the spin-off of its aerospace division. This impending breakup marks a significant shift for the over 100-year-old company, which has been streamlining its portfolio through sales and acquisitions. Furthermore, Honeywell issued a separate forecast projecting an adjusted profit per share between $10.10 and $10.50 for 2025, falling short of analysts' average estimate of $10.93 according to LSEG. Its projected sales range of $39.6 billion to $40.6 billion for the year also fell below Wall Street's expectations of $41.22 billion.
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