Honeywell has officially announced an intention to conduct a full separation of its Automation and Aerospace business.
According to certain reports, the stated separation, when packaged alongside company’s previously announced plan to spin Advanced Materials, will end up creating three distinct publicly listed industry leaders with unique strategies and growth drivers.
More on that would reveal how the development in question should be able to create a wide range of benefits. These benefits include a simplified strategic focus, greater financial flexibility to pursue distinct organic growth opportunities throughout investment cycles, and an improved ability to tailor capital allocation priorities in alignment with strategic focus.
Apart from that, the company is also likely to achieve focused boards of directors and management teams with deep domain expertise, alongside different investment profiles that position each company to unlock greater long-term value for shareholders.
“Building on decades of innovation as its heritage, Honeywell Automation will create the buildings and industrial infrastructure of the future, leveraging process technology, software, and AI-enabled, autonomous solutions to drive the next generation of productivity, sustainability and safety for our customers,” said Vimal Kapur, Chairman and CEO of Honeywell “As a standalone company with a simplified operating structure and enhanced focus, Honeywell Automation will be better able to capitalize on the global megatrends.”
Talk about Honeywell’s three envisioned companies on a slightly deeper level, we begin from Honeywell Automation. In essence, once the stated separation is realized, Honeywell Automation will become a leader of the industrial world’s transition from automation to autonomy, thanks to its comprehensive portfolio of technologies, solutions, and software that drive customers’ productivity.
The company will connect assets, people; and processes to power digital transformation, and therefore, build on decades-long technology leadership positions, deep domain experience, and a vast installed base to serve a variety of high-growth verticals.
All in all, Honeywell Automation will maintain a global scale, considering its 2024 revenue of $18 billion.
Next up, we have Honeywell Aerospace, a company poised to offer technology and solutions that can be used on virtually every commercial and defense aircraft platform worldwide. These solutions include aircraft propulsion, cockpit and navigation systems, and auxiliary power systems. With $15 billion in annual revenue during 2024 and a large, global installed base, Honeywell Aerospace will also be one of the largest publicly traded, pure play aerospace suppliers.
The company is expected to enjoy leading positions in technology and systems that will conceive future of aviation through electrification and autonomy of flight.
Moving on to the third Honeywell company in Advanced Materials, it will be a sustainability-focused specialty chemicals and materials company committed to offering fluorine products, electronic materials, industrial grade fibers, as well as healthcare packaging solutions. Having enjoyed a revenue of $4 billion last year, Advanced Materials can be expected to offer leading technologies with premier brands, including the breakthrough low global warming Solstice® hydrofluoro-olefin (HFO) technology.
The company, to realize all these components, will leverage a large-scale domestic manufacturing base, a compelling investment profile, and a more flexible and optimized capital allocation strategy.
Among other things, we ought to mention how, even with the separation of companies, Honeywell remains on pace to exceed its commitment to deploy at least $25 billion towards high-return capital expenditures, dividends, opportunistic share purchases, and accretive acquisitions through 2025.
The entire runner also delivers a rather interesting follow-up to the fact that, since 2023, Honeywell has announced a number of strategic actions to drive organic growth and simplify its portfolio. This includes approximately $9 billion of accretive acquisitions: the Access Solutions business from Carrier Global, Civitanavi Systems, CAES Systems, and the liquefied natural gas (LNG) business from Air Products.
“The formation of three independent, industry-leading companies builds on the powerful foundation we have created, positioning each to pursue tailored growth strategies, and unlock significant value for shareholders and customers,” said Kapur. “Our simplification of Honeywell has rapidly advanced over the past year, and we will continue to shape our portfolio to create further shareholder value. We have a rich pipeline of strategic bolt-on acquisition targets, and we plan to continue deploying capital to further enhance each business.”
