Honeywell to spin off two units
THE US technology and manufacturing company Honeywell announced on Tuesday that it planned to spin off parts of its business but would retain its aerospace technology operations, against the recommendations of an activist investor.
Honeywell had been under pressure to pursue an overhaul after Daniel Loeb, the activist investor in charge of the hedge fund Third Point, urged it to spin off the aerospace unit.
Honeywell rejected Loeb’s urgings, however, and said that it would instead split off its homes and global distribution units, which have about $4.5 billion of revenue a year, and its transportation systems unit, which has about $3 billion in revenue, into two publicly traded companies by the end of 2018.
The operations being spun off would be “better positioned to maximise shareowner value through focused strategic decision making and capital allocation tailored for their end markets”, Darius Ad- amczyk, the company’s president and chief executive, said in a news release.
Although the move by Honeywell was not in line with what Loeb and Third Point had advocated, the hedge fund nonetheless expressed support for Adamczyk and his plans to streamline the company.
“We are pleased that the board and management chose to conduct a thorough portfolio review and agreed that Honeywell should narrow its business focus,” a Third Point spokes- woman said in a statement.
The homes business Honeywell is spinning off will deal with heating, ventilation and air-conditioning, and with the distribution of security and fire protection products. It will be run by Gary Michel, who has moved from the manufacturer Ingersoll Rand, Honeywell said.
The transportation business will focus on technology used in cars, trucks and other vehicles.
The company indicated that more deals could be on the horizon.
“Honeywell will also have multiple levers for continuing to execute an aggressive capital deployment strategy,” including a “vigorous and disciplined” mergers and acquisitions program, Adamczyk said in the news release.
“We’re active in the market right now,” he said by telephone in a subsequent interview, “but valuations are quite high.”
The spinoffs come after United Technologies, which had rejected a deal with Honeywell, agreed in September to buy the airplane parts maker Rockwell Technologies for $30 billion, including debt.
During its pursuit of United, Honeywell had argued that combining the companies would create a “wellbalanced portfolio” of sales across the aerospace, homes and buildings, military contracting and energy sectors.
Then-US President Barack Obama speaks with employees at the Honeywell International facility during a company tour, in Golden Valley, Minnesota, on June 1, 2012.