Elliott Management Proposes Split for Honeywell

By Svea Herbst-Bayliss

(Reuters) – Activist investor Elliott Investment Management announced on Tuesday that Honeywell (NASDAQ:HON) should split into two separate businesses, following the trend of demergers among industrial conglomerates.

Elliott revealed that it has acquired a stake exceeding $5 billion in Honeywell, marking one of its largest investments. The firm argues that the company should focus on creating two standalone businesses, one centered on aerospace and another on automation. Following the announcement, Honeywell's shares rose 3%, despite giving up some earlier gains.

The investment firm criticized Honeywell's recent performance, citing "uneven execution, inconsistent financial results, and an underperforming share price" over the past five years. However, it acknowledged the company’s strong products and technology.

Honeywell’s stock has increased by 28% in the last five years, compared to a 94% surge in the Standard & Poor’s 500 index.

Under CEO Vimal Kapur, Honeywell has been actively pursuing a strategy shifting toward megatrends in automation, aviation, and energy transition, leading to asset sales that don’t align with these focuses.

Elliott, viewing Honeywell as an "iconic pillar" of American industry, believes that simplifying its structure could improve performance for customers, employees, and shareholders. The firm has requested a meeting with Honeywell’s board.

The investor forecasts that a separation could boost Honeywell’s share price by 51% to 75% within two years. Although Honeywell stated it was unaware of Elliott’s investment prior to this announcement, it expressed willingness to engage with the firm.

In the past month, Honeywell disclosed plans to spin off its advanced materials segment into a publicly traded entity and also indicated intentions to divest its personal protective equipment division.

After separating the aerospace unit, Elliott anticipates that Honeywell Automation would emerge as a stronger, more efficient business valued around $100 billion.

Elliott manages approximately $70 billion in assets and is a significant activist investor, having recently sought changes at companies like Southwest Airlines (NYSE:LUV) and Starbucks (NASDAQ:SBUX).

The firm’s survey indicates that many industrial shareholders believe that pure-play companies outperform diversified conglomerates.