Activist investor Elliott Investment Management has suggested that Honeywell should split into two standalone businesses—one dedicated to aerospace and the other to automation. This recommendation aligns with recent restructuring trends among industrial conglomerates, such as United Technologies, GE, and Ingersoll Rand.
In a letter disclosed Tuesday, Elliott revealed it had built a stake exceeding $5 billion in Honeywell, making this one of its largest investments to date. The firm’s representatives argued that Honeywell could benefit substantially from a simplified structure, with Elliott noting that, “Over the last five years, uneven execution, inconsistent financial results and an underperforming share price have diminished its strong record of value creation.” Honeywell’s shares rose 3% following the news, though they later shed some of those gains.
Over the past five years, Honeywell’s stock performance has lagged compared to broader market indices, gaining 28% versus the Standard & Poor’s 500 index, which has risen by 94%. This discrepancy in growth has led Elliott to believe that the company’s value is hampered by its current structure, despite the strength of Honeywell’s products and technology.
Honeywell’s Recent Strategic Shifts
Headquartered in Charlotte, North Carolina, Honeywell has been in an acquisition and divestiture phase since Vimal Kapur took over as CEO last year. Kapur has guided the company towards what Honeywell has termed “megatrends” in automation, aviation’s future, and energy transition. This shift has included selling off certain assets that don’t align with these themes.
Despite these efforts, Elliott argues that a division of Honeywell’s assets into two distinct businesses could foster better outcomes for customers, employees, and shareholders alike. “A separation could create two sector leaders that could perform better and benefit customers, employees and shareholders,” Elliott explained. The firm, describing Honeywell as an “iconic pillar” of American industry, also announced its intention to request a meeting with Honeywell’s management to discuss the proposal in more detail.
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