The Honeywell International sign sits outside of the company’s former global headquarters in Morristown, New Jersey.
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Activist investor Elliott Management has a $5 billion-plus stake in Honeywell, and it is pushing the industrial conglomerate to break itself up into two companies.
Elliott believes that Honeywell should divide itself along its two primary business lines — Aerospace, which supplies engines and avionics to the military and commercial users, and Automation, which is a supplier of sensors and control systems to industrial users.
Elliott managing partner Jesse Cohn and partner Marc Steinberg wrote in a Monday letter that “the conglomerate structure that once suited Honeywell no longer does.” Elliott believes that dividing Honeywell into two companies could unlock upside of as much as 75% over the next two years.
Honeywell CEO Vimal Kapur was appointed to the top job in 2023. He has made no secret of his penchant for M&A, snapping up billions of dollars’ worth of businesses in 2024 even amid a broader M&A slump.
In the past, Cohn and Steinberg wrote, Honeywell’s carefully assembled businesses had previously driven “consistent” margin improvements. But Honeywell has underperformed its industrial peers since 2019, something which the two attribute directly to a messy corporate structure, a challenged portfolio and shoddy investor messaging.
To be sure, the two noted that Honeywell was home to a “collection of best-in-class businesses,” highlighting its Aerospace business as the “crown jewel.” But Elliott noted that Honeywell’s best days had been under former CEO David Cote, and while the activist investor stopped short of criticizing Kapur, it said Honeywell had “struggled” to meet basic expectations around performance in recent years.
The “straightforward solution” to Honeywell’s struggles, Elliott said, would be a breakup of the business.
Elliott’s recommendation reflects a broader trend among industrial businesses. General Electric, arguably the archetypal conglomerate, earlier this year finally completed a plan first announced in 2018 to divide its empire into three parts. Other conglomerates like 3M and Johnson Controls have also sold or spun off businesses.
Elliott’s ask at Honeywell is one it has made before. It has built big positions to push for breakups or divestitures in recent years, including a 2019 push at Marathon Petroleum. Other companies targeted by Elliott have also pursued asset sales or breakups. Earlier, it also ran multiple campaigns at steel giant Alcoa to break up the company.
A Honeywell spokesperson said that the company and its board “acknowledge and appreciate the perspectives of all our shareholders.”
