Honeywell considers spinning off its aerospace business amid Elliott’s breakup push

Honeywell said on Monday it was considering a plan to separate its high-margin aerospace business, a move backed by activist investor Elliott Investment Management, which has been pushing for the company’s breakup.

The company, one of the last surviving U.S. conglomerates, has been on a deal-making spree this year under CEO Vimal Kapur, as it focuses on its automation, aviation and energy businesses.

Its shares have, however, underperformed this year, attracting the attention of Elliott, which has taken a $5 billion stake in the company and pushed for the separation of its aerospace and automation business.

Honeywell said on Monday its board had made “significant progress” on its review of strategic alternatives to date and the company would provide an update with its fourth quarter results. Shares were up 3.2% in trading before the bell.

Elliott responded by welcoming the company’s announcement.

“We believe the portfolio transformation Vimal and his team are leading represents the right course for Honeywell, and we look forward to the upcoming completion of the review and to supporting Honeywell as it implements the necessary steps to realize its full value,” the activist investor said.

A standalone aerospace business, which is Honeywell’s biggest unit and counts Boeing and Airbus as its customers, could be valued between $90 billion and $120 billion including debt, analysts say.

The aerospace unit, which builds everything from engines to cockpit components, has benefited from rising jet production in the last few years, though supply chain disruptions have hurt the company’s ability to meet some of that demand.

The jet-making boom is set to continue in the coming years amid record backlogs at plane makers, while a shortage of planes is set to boost demand for repairs. In 2023, Honeywell’s aerospace business reported revenue of $13.62 billion, with its commercial repairs and spare parts business accounting for 46% of that.

A potential spinoff will echo a similar move by General Electric in 2021. As of Friday, GE’s aerospace business had a higher market value than Honeywell as a whole.

Honeywell had disclosed in November that it would sell its personal protective equipment business to Protective Industrial Products for about $1.33 billion in cash.

The conglomerate has also bought Carrier’s security business for $4.95 billion and acquired aerospace and defense firm CAES Systems for $1.9 billion as part of its wider shift.

For the first nine months of 2024, Honeywell’s aerospace business reported revenue of $11.47 billion, accounting for about 40% of the firm’s total sales for the period.