Honeywell to Decide on Aerospace Spinoff by the Fall -- Update
May 23 2017 - 03:43PM
Dow Jones News
By Thomas Gryta
Honeywell International Inc. will decide whether to break off
its aerospace division by the fall, the company said Tuesday, and
it continues to work with advisers after activist Third Point LLC
made a public push last month for a spinoff.
The division, Honeywell's largest, supplies parts for Airbus SE
and Boeing Co. jets along with engines for aircraft made by
Bombardier Inc., and Textron Inc. and others. In a letter to
investors a month ago, Daniel Loeb's Third Point wrote that the
business has lagged behind its peers and separating it "would
result in a sustained increase in shareholder value in excess of
$20 billion."
At a presentation at the Electrical Products Group conference in
Florida, Honeywell said it is "modeling various scenarios" as part
of the review. Separately, it highlighted that Honeywell shares
have outperformed rivals and the aerospace division is positioned
for "sustainable growth" and margin expansion.
Darius Adamczyk, Honeywell's chief executive, called the
prospect of a spinoff "an intriguing concept" at the conference,
adding "I'm personally looking at the entire portfolio."
The Third Point letter came just a few weeks after Honeywell
switched leaders. Mr. Adamczyk took over as Honeywell's CEO,
succeeding longtime leader David Cote, who remains the company's
chairman.
Mr. Adamczyk said there would be one of three responses to the
Third Point push: Do nothing, pursue a separation of the division,
or acknowledge it as a good idea but pursue something
different.
He added that he would be conducting a full review of
Honeywell's operations as he ramps up as CEO, even without the push
from Third Point, noting that some buying and selling is likely
over the next two to three years.
"I'm pretty confident in saying that we are going to do some
portfolio work," Mr. Adamczyk said. "I'm not going to pre-announce
what we are going to do."
Before making major moves, either buying or selling businesses,
Honeywell is awaiting the outcome of any potential U.S. tax reform,
something that could make it easier to use overseas-based cash.
The company, which has a market value of roughly $100 billion,
makes everything from aircraft landing gears to home thermostats.
The aerospace business accounts for about 38% of its $39.3 billion
in annual sales.
Honeywell shares recently were up 0.1% to $131.85. The stock has
gained nearly 14% so far this year.
Write to Thomas Gryta at thomas.gryta@wsj.com
(END) Dow Jones Newswires
May 23, 2017 16:28 ET (20:28 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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