Honeywell to Spin Off Units Into Two Stand-Alone Companies -- Update

By Thomas Gryta Features Dow Jones Newswires

Honeywell International Inc. plans to spin off its home and transportation businesses into two new separate companies while retaining most of its core aerospace business, a first effort to streamline the conglomerate under new Chief Executive Darius Adamczyk.

Continue Reading Below

The New Jersey company said Tuesday the new homes and ADI Global Distribution business, which will include residential building controls and security and fire-protection products, would generate annual revenue of $4.5 billion. The transportation business, a portion of the company's current aerospace unit, would focus on turbocharger technologies for automobiles and trucks and generate annual revenue of $3 billion.

The entire company generated $39 billion of revenue last year.

Mr. Adamczyk said in prepared remarks the remaining Honeywell portfolio -- aerospace, defense, oil, gas and petrochemicals, industrial productivity, specialty chemicals and commercial buildings -- features "high-growth businesses in six attractive industrial end markets, each aligned to global megatrends." The company also plans to retain its smart energy business by moving it out of the home and building technologies business.

Honeywell expects the separations, which won't require a shareholder vote, to be complete by the end of 2018. The new homes business will have about 13,000 employees while the transportation business will have about 6,500.

Honewell on Tuesday said Gary Michel will take over as president and CEO of its home and building technologies strategic business group. Mr. Michel, who previously was a president at Ingersoll-Rand Company, will report to Mr. Adamczyk.

Continue Reading Below

He replaces Terrence Hahn, who is moving to a leadership role to help prepare the homes and ADI business to be spun off.

Mr. Adamczyk took the reins of Honeywell in late March and launched a monthslong portfolio review that looked at all aspects of the company, including whether it should remain whole. The company worked with advisers during the review to evaluate its 17 business units.

The effort received an extra push in late April when activist investor Third Point asked Honeywell to spin off its aerospace unit.

Mr. Adamczyk has stressed that the conglomerate structure has worked well for Honeywell-even as companies are under pressure to focus on core competencies.

Wall Street analysts had generally expected the company to keep the aerospace unit but possibly make other moves to narrow its operations.

The aerospace business has been in focus as rival United Technologies Corp. agreed to buy another parts maker, Rockwell Collins Inc., for $23 billion in September. The deal, which needs to be cleared by regulators and may get pushback from customers like Boeing Co., has highlighted the advantages of scale in a business that sometimes has parts makers competing with customers.

Also helping the resistance to breaking up the company: Honeywell shares are up 24% so far this year.

Honeywell on Tuesday raised its full year earnings per share guidance by 5 cents to a range of $7.05 to $7.10. The company, which is expected to report its third-quarter financial results Oct. 20, guided sales of $10.1 billion in its latest quarter, up 3% from a year ago.

Shares in the company rose 0.7% premarket Tuesday.

Honeywell had a string of success under previous CEO Dave Cote, who turned the company around and boosted its market value fivefold during his 14-year tenure. His expansion through acquisitions produced a conglomerate that makes everything from jet engines to thermostats to rubber boots. Mr. Cote remains Honeywell's chairman through April.

Cara Lombardo contributed to this article

Write to Thomas Gryta at thomas.gryta@wsj.com

(END) Dow Jones Newswires

October 10, 2017 08:43 ET (12:43 GMT)