Honeywell to split into three separate companies

Honeywell International Inc. will split into separate publicly traded companies following pressure from an activist investor, the latest in a line of industrial conglomerates seeking a more streamlined portfolio.

The Charlotte, North Carolina-based company plans to separate its aerospace division from its automation business, while also proceeding with a previously planned spin-off of its advanced materials arm. The breakup process should be complete by the second half of 2026, Honeywell said Thursday in a statement as it also reported quarterly results.

The decision, confirming a Bloomberg News report from last month, comes after activist Elliott Investment Management in November revealed a $5 billion-plus position in Honeywell — its largest ever in a single stock. The investor called for a split, saying Honeywell’s conglomerate structure was to blame for underperforming shares and inconsistent financial results.

Honeywell said in December that it was exploring a separation of the aerospace business. Under Chief Executive Officer Vimal Kapur, the company had already been taking steps to reshape its portfolio, including plans to spin the advanced materials division. It also completed the $5 billion purchase of Carrier Global Corp.’s security unit last year.

Separately Thursday, Honeywell forecast adjusted earnings of $10.10 to $10.50 a share for this year, falling short of the $10.94 average of analyst estimates compiled by Bloomberg. Its organic sales growth and free cash flow guidance also missed expectations. For the fourth quarter, adjusted earnings of $2.47 a share topped Wall Street’s estimates.

Honeywell’s shares reversed premarket gains after the worse-than-expected outlook, falling 4.2 per cent as of 6:36 a.m. in New York. The stock rose 7.7 per cent last year, trailing the S&P 500 Index.

Honeywell’s automation business, which makes a variety of products spanning warehouse robotics to smart energy equipment, had 2024 revenue of $18 billion. The aerospace operations, which outfit aircraft platforms, generated $15 billion in sales last year and will be one of the largest publicly traded, pure-play suppliers in the industry after the split, Honeywell said.

Elliott has said it believes a Honeywell breakup could result in a share price upside of 51-75 per cent over two years.

The company is the latest high-profile name to announce a breakup as it looks to boost shareholder value. General Electric Co. split itself into three parts by spinning off its health-care business in 2023 and its energy arm last year, while Emerson Electric Co. sold its Climate Technologies unit, now called Copeland, to investment firm Blackstone Group Inc. for $14 billion. 

Dan Loeb’s Third Point LLC built a stake in Honeywell in 2017 and called for the company to spin off its aerospace division. Former Honeywell CEO Darius Adamczyk instead spun off its Resideo Technologies Inc. thermostat, air filter and residential security system business and the Garrett Motion Inc. turbochargers unit.