(Bloomberg) -- Honeywell International Inc. is exploring a separation of its aerospace business as the industrial company faces calls from activist Elliott Investment Management for a breakup.
The potential move is under consideration as part of a broader review started earlier this year, Honeywell said Monday in a statement. The company plans to provide an update on the effort with its fourth-quarter earnings report.
Offloading the aerospace operations — which accounted for more than a third of Honeywell’s revenue last year — would extend the significant portfolio changes under Chief Executive Officer Vimal Kapur. Since taking the helm last year, he has sought to boost the underperforming stock in part through refocusing the company around aerospace, energy transition and automation systems for buildings and factories.
Elliott pushed further last month when it revealed a $5 billion-plus position in Honeywell — its largest-ever investment in a single stock — and encouraged management to separate into two standalone companies, one focused on aerospace and the other on automation. A number of industrial conglomerates including General Electric Co. have split apart in recent years in an effort to simplify their businesses and boost investor returns.
While Honeywell hasn’t finalized a plan for aerospace, committing to providing an update at earnings “suggests a larger breakup is likely,” Barclays analyst Julian Mitchell said in a note. Honeywell is “clearly stating its willingness to contemplate bigger strategic moves.”
Honeywell’s shares rose 3.3% at 11:10 a.m. in New York. The stock advanced 8.5% this year through Friday, trailing the 27% gain in the S&P 500 Index.
What Bloomberg Intelligence Says:
“Should Honeywell separate its aerospace business, as activist investor Elliott Investment Management has pushed for, it could create value for the conglomerate whose stock performance has trailed peers.”
— Karen Ubelhart, BI industrials analyst
Click here to read the research.
Elliott welcomed Honeywell’s review, including the potential separation of its aerospace operations. “The portfolio transformation Vimal and his team are leading represents the right course for Honeywell,” it said.
Honeywell has pursued several big deals under Kapur, including the $5 billion acquisition of Carrier Global Corp.’s security unit and the $1.3 billion sale of its personal protective equipment business. It also agreed to buy Air Products & Chemicals Inc.’s liquefied natural gas unit.
Bloomberg reported in July that Honeywell was considering an initial public offering of its majority-owned quantum computing firm Quantinuum as soon as next year.
Honeywell is “well-positioned for significant transformational alternatives, and we are continuing our deeper, more granular exploration of their feasibility and possible timing,” Kapur said in Monday’s statement.
(Updates with additional details throughout.)
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