Elliott Management Pressures Honeywell for Breakup
Activist investor Elliott Investment Management has taken a significant stake exceeding $5 billion in Honeywell International Inc. (NASDAQ:HON) and is urging the company to split into two independent entities. Today, Honeywell's shares reacted to the news with a 3% increase.
Elliott proposed that Honeywell, a leading name in American industry, separate into two independent companies focused on aerospace and automation sectors. This suggestion follows a trend among other industrial conglomerates, such as United Technologies, GE, and Ingersoll Rand (NYSE:IR), to streamline operations through similar divestitures.
In a letter addressed to Honeywell's board, Elliott praised the company's products and technology but criticized its inconsistent performance and erratic financial results over the past five years. During this period, Honeywell's stock rose by 28%, lagging behind the 94% increase of the Standard & Poor's 500 index. Elliott projected that a split could lead to an increase in Honeywell's stock price of between 51% and 75% within the next two years.
Charlotte, North Carolina-based Honeywell, under CEO Vimal Kapur, who took office last year, is actively reshaping its business portfolio. The company is divesting assets that do not align with strategic areas such as automation, the future of aviation, and energy transformation. Last month, Honeywell announced its intention to spin off its advanced materials unit into a separate public company and is also exploring the sale of its personal protective equipment division.
Elliott expressed confidence that, following the separation of Honeywell Automation's aerospace unit, it would emerge as a stronger, more effectively managed business valued at around $100 billion. The firm is seeking a meeting with Honeywell to discuss its proposal.
In response to Elliott's stake and proposal, Honeywell indicated that, despite being unaware of Elliott's investment beforehand, it is open to discussions with the firm. Elliott, which manages approximately $70 billion in assets, is known for taking active roles in companies and has recently spearheaded changes at Southwest Airlines (NYSE:LUV) and Starbucks (NASDAQ:SBUX). A survey conducted by Elliott among industrial company shareholders revealed a preference for specialized industrial firms over diversified conglomerates, aligning with the pressure the investor is placing for Honeywell's transformation.
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