Elliott Demands Honeywell Breakup After Taking $5B Stake

Having shaken up Southwest Airlines, activist investor Elliott Investment Management is setting its sights on a new target: Honeywell International.

Elliott announced Nov. 12 that it has invested more than $5 billion in the Charlotte, North Carolina-based industrial conglomerate and sent a letter to the company’s board of directors demanding that it break up into two companies, one focused on aerospace and the other on automation.

“Honeywell remains a world-class company with market-leading assets,” Elliott said in a statement. “However, over the last five years, uneven execution, inconsistent financial results and an underperforming share price have diminished its strong record of value creation. We believe these challenges have a clear cause and a straightforward solution: The conglomerate structure that once suited Honeywell no longer does, and the time has come to embrace simplification.”

Honeywell International is forecasting just under $39 billion in sales in 2024. About 37% of its revenue last year came from Honeywell Aerospace Technologies, which is based in Phoenix and manufactures aircraft engines, avionics and a variety of other products for the business aviation, space, defense, general aviation, rotorcraft and urban air mobility sectors.

Elliott said a separation of the parent company into two independent entities, Honeywell Aerospace and Honeywell Automation, would lead to simplified strategies, focused management, better operational performance “and numerous other benefits now enjoyed by dozens of large businesses that have moved on from the conglomerate structure.”  It predicted a breakup could lead to a 51-75% increase in share price over two years.

“Honeywell’s Board of Directors and management acknowledge and appreciate the perspectives of all our shareholders,” Stacey Jones, the company’s chief communicator, told Aviation Week in response to a query. “Although Elliott had not made us aware of their views prior to today, we look forward to engaging with the firm to obtain their input. Our leadership welcomes investor feedback as we continue to execute a disciplined strategy, which includes pursuing sustainable growth, optimizing the portfolio, and maintaining an accretive capital deployment program. “

Elliott’s investment in Honeywell follows its recent move to take a large stake in Southwest Airlines, which it called “the most compelling airline turnaround opportunity in two decades.”  Under pressure from the activist firm, Southwest ultimately revamped its board and announced plans to scrap open seating and other practices that had been in place since the airline’s founding in 1971.