Honeywell International announced plans to spin off its advanced materials business into a separate publicly traded company as part of a strategy to streamline its focus on core business lines. This advanced materials business encompasses notable brands such as Solstice, Spectra, Hydranal, and Aclar, which will be separated in a tax-free spin-off to shareholders.
The anticipated timeline for completing this transaction is by the end of 2025 or early 2026. The new standalone company is set to operate strictly as a specialty chemicals and materials entity, expected to leverage its financial flexibility to explore growth opportunities during various investment cycles.
This strategic direction has been emphasized in company statements, showcasing advanced materials' robust portfolio, which boasts over 4,000 patents, an expansive manufacturing base, and pivotal roles in the shift towards low-carbon solutions. Chief Executive Vimal Kapur remarked, "As a sector leader, this new company will have a greater strategic focus on innovation, enabling it to develop new, more sustainable solutions and products with next-generation chemistry to create further value for shareowners." Financially, Honeywell projects that the advanced materials business will generate approximately $3.8 billion in revenue in 2024.
The revenue for 2023 has already shown has increased to $3.65 billion from $3.59 billion the previous year, displaying resilience in its earnings. The margins for earnings before interest, taxes, depreciation, and amortization (EBITDA) are estimated to exceed 25% this year according to the management’s forecast. This spinoff is aligned with Honeywell's efforts to sharpen its focus on automation, aviation, and energy transition sectors.
Recent acquisitions over the past 12 months, such as Carrier Access Solutions, Civitanavi, CAES, and Air Products and Chemicals' liquefied natural gas business, bolster these focal areas. Honeywell is currently progressing towards its target of deploying at least $25 billion in capital expenditures, dividends, share repurchases, and accretive acquisitions by 2025, with $9 billion already allocated to acquisitions in 2024. Notably, the company’s capital deployment strategy is expected to remain unaffected by the impending spinoff, ensuring continuity in its investment initiatives.
Furthermore, Honeywell has successfully repurchased $1.2 billion in shares this year, reinforcing confidence in its stock. Price: 206.09, Change: +2.76, Percent Change: +1.36.