Honeywell's Split A New Era in Industrial Conglomerates

Honeywell's Split A New Era in Industrial Conglomerates

In a significant development for the business world, Honeywell International Inc. has announced its decision to split into three independently listed companies. This move marks a milestone in the company's history and raises questions about the potential benefits and challenges that lie ahead.

A Bold Move

Honeywell has revealed plans to separate its aerospace and automation businesses into distinct entities, in addition to the previously announced spin-off of its advanced materials unit. The move is expected to create three standalone companies by the second half of 2026, each focused on specific industries and markets.

Market Reaction A Mixed Bag

Honeywell's shares fell nearly 4 percent following the announcement, as investors reacted to the company's downbeat forecast for 2025 results. While some experts believe it may take time for the market to realize the value of the new entities, others anticipate increased growth and profitability.

The Rationale Behind the Split

According to Tony Bancroft, a portfolio manager at Gabelli Funds, the aerospace and automation businesses could be valued at $104 billion and $94 billion, respectively. However, he cautioned that it may take time for the market to recognize the value of these new entities.

A Broader Trend in Industrial Conglomerates

Honeywell's decision is part of a broader trend in industrial conglomerates, as companies such as 3M, General Electric, and United Technologies have also chosen to split off major divisions. This trend reflects the changing needs of industries and the desire for greater focus on specific markets.

A Positive Development?

Eric Martel, CEO of business jet maker Bombardier, welcomed Honeywell's announcement, stating that having more focus is never a bad thing, particularly in the aerospace industry.

Elliott Management's Influence

Honeywell's decision to split comes just months after activist investor Elliott Management took a $5-billion stake in the company. Elliott's involvement has been instrumental in driving change at Honeywell and pushing for greater focus on its core businesses.

A Test of Time?

While some experts believe that the separation could lead to increased growth and profitability, others remain skeptical. The performance of previous spin-offs will be a key indicator of the success of this strategy.

Conclusion

Honeywell's decision to split into three independently listed companies marks a significant milestone in the company's history. While there are challenges ahead, the potential benefits of this move could ultimately lead to increased growth and profitability for shareholders. As the market reacts to this news, it remains to be seen whether the separation will prove a wise decision or a vestige of a bygone era.

Keywords Honeywell, industrial conglomerates, spin-offs, aerospace industry, automation, advanced materials unit, Elliott Management, activist investors, market reaction

Edward Lance Arellano Lorilla

CEO / Co-Founder

Enjoy the little things in life. For one day, you may look back and realize they were the big things. Many of life's failures are people who did not realize how close they were to success when they gave up.