NEW YORK--Honeywell International Inc said Tuesday it will pare its focus to four business lines, including aerospace, and spin off two businesses with $7.5 billion in revenue to help fund acquisitions.
The reorganization, which reduces revenue by about 18 percent, will simplify Honeywell's broad portfolio, boost growth and give shareholders a tax-free benefit from the new companies, Honeywell Chief Executive Officer Darius Adamczyk said on a conference call on Tuesday.
It also gives the diversified manufacturer scope to change its remaining portfolio along the lines sought by hedge fund Third Point Capital, which agitated for a spin-off of aerospace. Third Point said on Tuesday it was pleased with the changes and backed Adamczyk's leadership, though it wants him to keep improving the portfolio.
Adamczyk hinted at more to come, saying the two new businesses "can grow at an accelerated rate."
The remaining businesses - aerospace, commercial building products, performance materials and safety products - are candidates for more acquisitions, he added. "I'm very excited about M&A in all four of our businesses. And I think these two spins ... give me a lot of different levers to invest our M&A dollars."
Analysts praised the moves, but said Honeywell had more changes to make, and warned that aerospace, with products ranging from jet engines to airplane WiFi systems, may need to merge to gain the size to compete with larger rivals.
A spin-off or merger with General Electric Co's aerospace unit would make Honeywell a stronger competitor to United Technologies and a "more powerful supplier to Boeing Co and Airbus SE," Scott Davis, analyst at Melius Research, wrote in a note. "That's a deal worth thinking about."
