Honeywell International’s management has been on quite a ride since last month after activist investor Elliott Management took a $5 billion stake in the company. The activist investor believes a breakup of the business will help the management run it more efficiently. As a result, the market can easily give it a higher valuation as opposed to the current undervalued state of the struggling conglomerate.
The aerospace division, which brings in 40% of the company’s total revenue, will now be separated from the rest of the business according to the company’s announcement. The separation comes at a time when the aviation industry is recovering from the post-covid slump. Improved management and aviation industry tailwinds are likely to make this move a success. This division boasts Boeing and AirBus as its main customers and could get valued anywhere between $90 to $120 billion including debt. The stock has already gained over 3% today and is up 13.5% since its November lows, signaling improved investor confidence on the back of THE activist takeover.
The move will also help the management focus on the company’s industrial automation segment, which was down 5% YoY in the last quarter and has been struggling. The management plans to reveal more details on this move at the Q4 earnings call.
Elliott Management has received the news well, with its partners confirming earlier today that they were quite happy with the announcement. Honeywell has a strong history of fending off activist investor pressure. Honeywell is one of the last surviving conglomerates in the US and in 2017, it successfully managed to deal with an activist campaign without breaking up the company. This time, however, it seemed the company didn’t want to object. After Elliott Investment announced its stake last month, the company sold its PPE business for $1.3 billion.
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Disclosure: None. This article was originally published at Insider Monkey.
