Being a gigantic, industrial conglomerate is out—breaking up into smaller, sleeker separate companies is in.
Honeywell International announced today it is splitting up into three independent companies focused on three different businesses: aerospace, automation, and advanced materials. The move comes after pressure from activist investor Elliott Investment Management, which took a $5 billion stake in the firm in November.
Honeywell, the 119-year-old industrial behemoth that touches a range of industries from aerospace to pharmaceutical packaging manufacturing, has been under increasing pressure to modernize. Shares have only climbed 9% over the past 12 months, underperforming the broader market’s increase of 23% over the same period—opening the door for Elliott.
Shares popped on the deal’s announcement this morning, but ultimately fell 5.64% as investors digested a disappointing earnings forecast.
The deets: Honeywell’s advanced materials segment will continue its previously announced separation, while its automation and aerospace businesses will be split by 2026.
Its automation business is the largest part of the company, with about $18 billion in sales last year. But its aerospace arm could be particularly lucrative: It reeled in $15 billion in revenue last year, and once it’s separated from the rest of Honeywell it will be one of the largest public aerospace players on the market. The smallest of the new firms is advanced materials, which brought in about $4 billion in sales last year.
The end of the conglomerate era
Honeywell joins the graveyard of former aging conglomerates that are now young, independent firms, including 3M United Technologies, and most recently General Electric.
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GE, which wrapped up its separation in 2024, showed investors that sometimes three really is better than one. The separated aerospace, energy, and healthcare businesses—GE Aerospace, GEO Vernova, and GE HealthCare Technologies—now have a combined market value of over four times the value that GE had before it began splitting up in 2022. Just last week, GE Aerospace closed at a record high, following GE Vernova, which broke its own record high two weeks ago.
GE’s success proves a point that investors have been making for years: While giant, industrial conglomerates that touch a range of different businesses used to be a staple of American industry, shareholders have been pushing for these gigantic companies to rethink their structure. After all, a more focused, streamlined, and efficient business tends to please Wall Street more than a hefty giant that does a little bit of everything.
According to data from RBC Capital Markets, a group of 12 industrial splits gained roughly 50% the year after their separations, outperforming the broader market. Spinoff IPO deals have been growing in size, too. Prior to 2008, the average market value of a spinoff was $1 billion—now that figure is $2.5 billion, according to Trivariate Research.
How does this work for investors? Essentially, shareholders in Honeywell who keep their shares amid the breakup will be paid the value of the difference between the new businesses and the old conglomerate.—LB