Honeywell to Divide into Three Independent Companies

Honeywell revealed plans to separate into three distinct businesses

On Thursday, Honeywell revealed plans to separate into three distinct businesses, following persistent pressure from activist investor Elliott Investment Management.

Honeywell’s Three-Way Split: Automation, Aerospace, and Advanced Materials

Honeywell’s planned breakup will see its operations split into three separate companies, with automation emerging as the largest division, generating approximately $18 billion in annual revenue. The aerospace sector follows closely with around $15 billion, while advanced materials is the smallest, contributing about $4 billion per year.

What’s Driving the Decision?

The idea appears to stem from activist investment firm Elliott Investment Management, which first proposed the move in November. Elliott may have drawn inspiration from General Electric’s recent restructuring, which has arguably unlocked hundreds of billions in shareholder value.

The Financial Logic Behind the Move

One of the key reasons spin-offs can drive value is valuation multiple arbitrage—where different business segments command higher trading multiples when separated.

Currently, Honeywell’s stock trades at roughly 21.5 times its projected 2025 earnings per share (EPS). However, more specialized companies in the same industries often trade at higher multiples:

• GE Aerospace: ~38x earnings
• Rockwell Automation (a competitor in automation): ~28x earnings
• DuPont (advanced materials): ~18x earnings

DuPont’s lower valuation is part of why it intends to spin off its electronics business in late 2025. Honeywell appears to be following a similar strategy.

Honeywell CEO’s Perspective

Honeywell CEO Vimal Kapur emphasized the strategic benefits of the split, stating in a press release:

“The formation of three independent, industry-leading companies builds on the powerful foundation we have created, positioning each to pursue tailored growth strategies. We will continue to shape our portfolio to create further shareholder value. We have a rich pipeline of strategic bolt-on acquisition targets, and we plan to continue deploying capital to further enhance each business.”

His remarks acknowledge the risk of "deal limbo"—a period when stock performance stalls as investors wait for the spin-offs to take effect.

Timeline for the Breakup

• Advanced materials spin-off: Expected completion between late 2025 and early 2026.
• Automation & Aerospace separation: Targeted for the second half of 2026.

This is a significant restructuring, and Kapur is betting that, in the long term, it will yield strong results for investors.

Recent Financial Performance

For the fourth quarter, Honeywell reported:

• Adjusted EPS: $2.47 (above analysts' expectations of $2.32).
• Revenue: $10.1 billion (beating the estimated $9.8 billion, per FactSet).

While the split is a bold move, these solid earnings suggest the company is entering this transition from a position of strength.

Why It’s Significant

This move aligns Honeywell with other major industrial firms undergoing similar restructurings, including General Electric and Emerson Electric. Additionally, Belgian cement powerhouse Titan Cement is working toward spinning off its U.S. operations through an IPO.

For Honeywell, this decision has been a long time coming. Activist investor Dan Loeb initially pushed for the Charlotte-based corporation to separate its aerospace division eight years ago.

The Breakdown

Honeywell will officially separate its aerospace division from its automation segment, while also moving forward with previously disclosed plans to carve out its advanced materials business.

The Big Picture

This marks one of Elliott’s most notable victories—both in terms of the scale of the company and the extent of influence it exerted to bring about these changes.

Financial Impact

In a move reminiscent of General Electric’s restructuring, Honeywell is strategically splitting into three standalone entities to enhance shareholder value.

The industrial giant, trading under HON, also reported its fourth-quarter earnings on Thursday. While financial results were strong, the company's forward guidance fell short of Wall Street expectations.

Investors are likely to focus on Honeywell’s 2025 projections, but even more so on its decision to reorganize its portfolio. The split will create three independent companies, each focusing on a specific sector: automation, aerospace, and advanced materials.