Honeywell Weighs Aerospace Split: A New Chapter for Conglomerates?

Honeywell International Inc. (HON) is considering a significant strategic move that could reshape the aerospace industry and follow in the footsteps of other US conglomerates that have recently broken up. The company, which has been under pressure from activist investor Elliott Management, is exploring the potential separation of its Aerospace business. This decision comes as Honeywell seeks to unlock shareholder value and better position itself for growth in the automation and energy transition sectors.

Honeywell's Aerospace division, a crown jewel within the conglomerate, has faced challenges in recent years, despite being home to best-in-class businesses. The company's underperformance relative to its industrial peers since 2019 has led to a reevaluation of its corporate structure. Elliott Management, which holds a stake of more than $5 billion in Honeywell, has advised the company to simplify its structure by separating its automation and aerospace businesses.

The potential separation of Honeywell's aerospace division aligns with the company's strategic focus on automation, aviation, and energy transition. By divesting the Aerospace division, Honeywell can concentrate resources on its core businesses, which are better positioned to capitalize on the megatrends driving growth in the automation and energy sectors. This strategic move could unlock value for shareholders by allowing each business to operate independently and pursue tailored growth strategies.



Honeywell's exploration of separating its Aerospace business could unlock significant synergies and cost savings. By focusing on its core Automation and Energy Transition segments, Honeywell can streamline operations, reduce overhead, and allocate resources more effectively. This could lead to improved margins and increased shareholder value. Additionally, a standalone Aerospace business could attract investors seeking exposure to the aerospace industry, potentially leading to a higher valuation for both companies.

The potential separation of Honeywell's aerospace division follows a trend of US conglomerates breaking up to become more agile. General Electric (GE) completed a plan in 2021 to divide its empire into three parts, while Dow Chemical merged with DuPont in 2017 and later separated into three independent companies. Honeywell's aerospace division, a "crown jewel" according to Elliott, could unlock significant value if spun off, similar to GE's aviation unit, which became a standalone company in 2019. However, Honeywell's stock has underperformed its peers, and a breakup could help it better compete in today's market.



In conclusion, Honeywell's consideration of jettisoning its aerospace division is a strategic move that could unlock significant value for shareholders. By focusing on its core businesses and allowing the Aerospace division to operate independently, Honeywell can better capitalize on the megatrends driving growth in the automation and energy sectors. This decision follows a trend of US conglomerates breaking up to become more agile and better positioned for long-term success. As Honeywell continues its review of transformational portfolio actions, investors should closely monitor the company's progress and potential updates on the Aerospace division's future.