Honeywell International ($HON) announced on Monday that it is evaluating a potential separation of its aerospace business as part of the industrial conglomerate's strategy to optimize its portfolio. The company stated that its board of directors continues to explore strategic alternatives aimed at unlocking shareholder value, having made "significant progress" thus far.
Honeywell plans to provide further updates on this matter in its fourth-quarter earnings report. The stock rose by 2.4% during premarket trading. "Since aligning our business in January to three compelling megatrends -- automation, the future of aviation, and energy transition -- we have swiftly and decisively optimized the Honeywell portfolio to achieve superior growth and enhance shareholder value," said Chief Executive Vimal Kapur in a statement.
"At the same time, we have been assessing the prospect of more transformational changes." In November, activist investor Elliott Investment Management revealed a more than $5 billion investment in Honeywell and advocated for the company to separate into two independent entities to distinguish its aerospace and automation divisions.
"Elliott welcomes Honeywell's announcement today of its ongoing review of strategic alternatives, including the separation of its Aerospace business," stated Elliott Partner Marc Steinberg and Managing Partner Jesse Cohn in a separate statement on Monday. "We believe the portfolio transformation that Vimal and his team are orchestrating reflects the appropriate direction for Honeywell, and we look forward to the concluding steps of the review and to supporting Honeywell in its pursuit of realizing its full value." Honeywell previously disclosed plans in October to spin off its advanced materials division into a separate publicly traded company.
Last month, the conglomerate agreed to divest its personal protective equipment branch, part of the industrial automation segment, to a portfolio company of private equity firm Odyssey Investment Partners for approximately $1.33 billion in an all-cash transaction. Over the last year, the company has completed several acquisitions to bolster its emphasis on automation, aviation, and energy transition, including Carrier's Global Access Solutions, Civitanavi, CAES, and Air Products and Chemicals' (APD) liquefied natural gas business.
"Following the portfolio enhancements announced earlier this year, Honeywell is now well-positioned for considerable transformational alternatives, and we are continuing our more in-depth assessment of their feasibility and potential timing," Kapur asserted on Monday. Earlier in December, Honeywell decreased its fourth-quarter and full-year outlook after finalizing an agreement to provide aviation technology to Canadian aircraft manufacturer Bombardier.
The investment required for this deal prompted the company to adjust its guidance..