Honeywell to Spin Off Units Into Two Stand-Alone Companies

By Thomas Gryta Features Dow Jones Newswires

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

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The company said the homes and global distribution business, which includes building controls and security and fire protection products, would generate annual revenue of $4.5 billion while the transportation business focused on turbocharger technologies for automobiles and trucks would generate revenue of $3 billion a year.

"The remaining Honeywell portfolio will consist of high-growth businesses in six attractive industrial end markets, each aligned to global mega trends including energy efficiency, infrastructure investment, urbanization and safety," Mr. Adamczyk said in prepared remarks.

The company expects the separations, which won't require a shareholder vote, to be complete by the end of 2018.

Mr. Adamczyk took the reins in late March and launched a months long portfolio review that looked at all aspects of the company, including if it should remain whole.

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

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Wall Street analysts had generally expected the company to keep the aerospace unit but possibly make other moves that would narrow a company that had revenue of $39 billion last fiscal year.

The transportation business represents a portion of the aerospace unit.

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. The company on Tuesday also raised its full year earnings per share guidance by 5 cents to a range of $7.05 to $7.10.

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.

The company worked with advisers during the portfolio review to evaluate its 17 business units with a long-term view and no commitment to any particular business line.

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

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

(END) Dow Jones Newswires

October 10, 2017 07:31 ET (11:31 GMT)