Activist investor Third Point LLC disclosed it has taken a stake in Honeywell International Inc. and called on the conglomerate's newly appointed chief executive to spin off its aerospace business.
The aerospace unit has been a drag on the company's performance and separating it "would result in a sustained increase in shareholder value in excess of $20 billion," Daniel Loeb's Third Point wrote in a letter to its investors Thursday. The activist argued organic growth at the unit has lagged behind that of its peers.
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Honeywell said it would conduct a review of the potential separation of its aerospace business. "Honeywell's management and Board regularly conduct portfolio assessments and have a demonstrated track record of effective portfolio realignment and capital deployment actions," the company said.
Honeywell, which has a market value of about $100 billion, makes everything from aircraft landing gears to home thermostats. The aerospace business accounts for about 37.5% of its $39.3 billion annual sales. The segment's revenue declined 3% in 2016.
Shares of Honeywell jumped 4.7% to $136.00 on the news in after-hours trading Thursday.
Third Point's approach comes a few weeks after Darius Adamczyk took over as Honeywell's CEO from longtime leader David Cote, who remains the company's chairman.
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Corrections & Amplifications
This item was corrected at 7:52 p.m. ET to clarify that The aerospace business accounts for about 37.5% of Honeywell's $39.3 billion annual sales. The original incorrectly implied that $39.3 billion was that fraction of its annual sales in the sixth paragraph.
The aerospace business accounts for about 37.5% of its $39.3 billion annual sales. "Third Point Calls for Honeywell to Spin Off Aerospace Unit," at 6:12 p.m. ET and subsequent updates, incorrectly implied that $39.3 billion was that fraction of its annual sales in the sixth paragraph. (April 27, 2017)
(END) Dow Jones Newswires
April 27, 2017 20:02 ET (00:02 GMT)