Honeywell to split into 3 companies after Elliott Management takes $5 bn stake

Honeywell is splitting into three independently listed companies, breaking up one of America’s last standing conglomerates just months after activist investor Elliott Management took a $5 billion stake in the industrial giant.

Honeywell shares fell nearly 4% after the company forecast downbeat 2025 results and some experts suggested gains from the separation could take time to materialize.

The company said on Thursday it would separate its aerospace and automation businesses into separate entities, alongside its previously announced spin-off of the advanced materials unit.

With Honeywell’s decision, the ranks of the nation’s leading industrial conglomerates have dwindled even further, following similar choices in recent years by 3M, General Electric and United Technologies to split off major divisions.

Tony Bancroft, a portfolio manager at Gabelli Funds which holds Honeywell’s shares, said the aerospace and automation businesses could be valued at $104 billion and $94 billion, respectively, but cautioned it could take time for the market to realize the value.

“We continue to believe the (Honeywell) separation makes strategic sense, however, we note that our sum-of-the-parts valuation points to little near-term upside,” RBC Capital Markets analyst Deane Dray wrote in a note.

RBC Capital Markets data shows a group of 12 industrial spin-offs gained about 50% in the year following their respective separations, outperforming the Industrial Select Sector SPDR Fund by nearly 27%.

More broadly, evidence of the upside from spin-offs is mixed. Invesco’s Spin-off ETF, a fund that tracks S&P 500 companies that have spun out from larger corporations, has trailed the market over the last decade.

Eric Martel, CEO of business jet maker Bombardier, told reporters on Thursday he is very pleased with Honeywell’s announcement which he sees as a positive.

“I think having more focus is never a bad thing,” he said about the aerospace division, which he added has become very significant.

Honeywell last year reached an agreement to provide its avionics, propulsion and satellite communication technologies for Bombardier’s aircraft.

The industrial and aerospace giant has been on a deal-making spree under CEO Vimal Kapur, shedding assets that are not focused on the aviation, automation and energy sectors.

Despite several smaller moves, Elliott, whose stake in Honeywell is its largest single investment, argued the company needed to split.

Honeywell attracted the activist investor’s attention as its stock price underperformed the market. Its shares had risen 7.7% in 2024 until Nov. 11, a day before Elliott disclosed its position, while the broader market had gained 26.6% in the same period.

Elliott’s push is not the first time Honeywell has faced activist pressure to break up the company. In 2017, it managed to shrug off Daniel Loeb’s Third Point, which urged the company to spin off its aerospace division.

Analysts had previously estimated Honeywell’s high-margin aerospace business to be worth between $90 billion and $120 billion, including debt.

The aerospace unit is Honeywell’s biggest revenue generator, accounting for about 40% of the company’s total revenue in 2024, and counts Boeing and Airbus among its customers.

The company said it intends to complete the separation in the second half of 2026, which would be tax-free to its shareholders.

Honeywell, however, has been grappling with sluggish demand in its industrial automation segment – which helps factories and warehouses mechanize their operations – as a pandemic-driven boom in e-commerce moderates.

It forecast an adjusted profit per share of between $10.10 and $10.50 for 2025, falling short of analysts’ average estimate of $10.93 according to data compiled by LSEG.

The company’s sales expectations of between $39.6 billion and $40.6 billion for the year also fell short of Wall Street expectations of $41.22 billion.