Honeywell is set to divide into three independently listed companies, marking the dissolution of one of America’s remaining conglomerates just months after activist investor Elliott Management acquired a $5 billion stake in the industrial firm. Following the announcement, Honeywell’s shares dropped nearly 4% as the company projected disappointing results for 2025, with some analysts indicating that the benefits of the separation may take time to be realized.
On Thursday, Honeywell revealed plans to separate its aerospace and automation divisions into distinct entities, in addition to its previously announced spin-off of the advanced materials unit. This decision further reduces the number of major industrial conglomerates in the U.S., following similar moves by 3M, General Electric, and United Technologies in recent years.
Tony Bancroft, a portfolio manager at Gabelli Funds, which holds Honeywell shares, estimated that the aerospace and automation businesses could be valued at $104 billion and $94 billion, respectively, but warned that it may take time for the market to recognize this value. RBC Capital Markets analyst Deane Dray noted that while the separation appears strategically sound, their sum-of-the-parts valuation suggests limited short-term upside.
Data from RBC Capital Markets indicates that a group of 12 industrial spin-offs saw an average gain of about 50% in the year following their separations, outperforming the Industrial Select Sector SPDR Fund by nearly 27%. However, the overall evidence regarding the benefits of spin-offs is mixed; Invesco’s Spin-off ETF, which tracks S&P 500 companies that have spun off from larger corporations, has underperformed the market over the past decade.
Eric Martel, CEO of Bombardier, expressed his satisfaction with Honeywell’s announcement, viewing it as a positive development. He emphasized that increased focus is beneficial, particularly for the aerospace division, which has grown significantly. Last year, Honeywell secured an agreement to supply avionics, propulsion, and satellite communication technologies for Bombardier’s aircraft.
Under CEO Vimal Kapur, Honeywell has been actively restructuring, divesting assets that do not align with its core focus on aviation, automation, and energy. Despite several smaller transactions, Elliott, which holds its largest single investment in Honeywell, has advocated for the company’s split due to its stock price lagging behind the market. Prior to Elliott’s disclosure of its position on November 11, Honeywell’s shares had increased by 7.7% in 2024, while the broader market had risen by 26.6%.
This is not the first instance of activist pressure on Honeywell to consider a breakup; in 2017, the company successfully resisted calls from Daniel Loeb’s Third Point to spin off its aerospace division.
