Honeywell International Inc., under pressure from activist investor Elliott Management, has announced plans to divide into three distinct publicly traded companies. The decision comes after significant lobbying by Elliott, which had previously advocated for a breakup of the conglomerate in 2017. This latest push led Honeywell to contemplate spinning off its aerospace division as early as December 2024.
Elliott targeted Honeywell following a period of underperformance in its stock price compared to the broader market. By November 11, 2024, Honeywell shares had risen 7.7% for the year, whereas the broader market experienced a 26.6% increase. This disparity attracted Elliott's attention, prompting a strategic evaluation by Honeywell that ultimately resulted in the decision to split the company.
The aerospace unit, which is Honeywell's largest revenue generator, accounted for approximately 40% of total revenue in 2024. With prominent clients such as Boeing and Airbus, the division has benefitted from increased sales in aftermarket services and parts, driven by a shortage of new jets in the airline industry. Analysts estimate the high-margin aerospace business could be worth between $90 billion and $120 billion, inclusive of debt.
Despite its strengths, Honeywell's financial forecasts have not met analysts' expectations. The company projected an adjusted profit per share of between $10.10 and $10.50 for 2025, falling short of market estimates. Similarly, its sales outlook has not aligned with Wall Street's anticipations.
In recent years, Honeywell has been actively refining its portfolio through various divestments and acquisitions. These strategic changes align with the company's plan to complete the separation into three entities by the second half of 2026. The transition will be tax-free for shareholders.
Honeywell's aerospace division holds contracts with the U.S. government, providing critical communication and navigation systems among other services. As one of America's last standing conglomerates, Honeywell's decision to split marks a significant transformation in its operational structure.