Honeywell Will Spin Off Advanced Materials Unit to Focus on ‘Megatrends’

Honeywell plans to spin off its advanced materials unit as a publicly listed company so it can prioritize “megatrends.”

Photo of a Honeywell headquarters building
Photo by Scott Ritchie via CC BY-SA 4.0

Sign up for smart news, insights, and analysis on the biggest financial stories of the day.

We’re seeing a trend here. 

Honeywell, the North Carolina-based $134 billion multinational conglomerate, said Tuesday that it plans to spin off its advanced materials unit as a publicly listed company so it can prioritize the ambitious “megatrends” driving its C-suite.

Keep It Simple(r)

Honeywell CEO Vimal Kapur took over last year with a focused ambition: to concentrate the behemoth firm on “three compelling megatrends: automation, the future of aviation, and energy transition.” Honeywell went on an acquisition spree in the ensuing months, buying Carrier’s digital security business for $5 billion, aerospace and defense firm CAES Systems for $2 billion, and Air Products‘ Liquefied Natural Gas tech business for $1.8 billion to better align with Kapur’s vision. Honeywell has committed to put $25 billion “toward high-return capital expenditures, dividends, opportunistic share purchases and accretive acquisitions,” and says $9 billion of that has gone toward acquisitions this year.

But this has left the advanced materials division the odd unit out, and also given rise to concerns that it will be a drag on Honeywell’s valuation when its focus is elsewhere. The spinoff aims to give Honeywell and the new company more flexibility:

  • Honeywell’s advanced materials division makes everything from industrial solvents to medical-grade bio fiber for orthopedic devices to ballistic composites for military body armor. Barclays valued the division at $11 billion, according to Reuters, while The Wall Street Journal spoke to sources who said it could be worth over $10 billion as a publicly traded company — in other words, a not insignificant business.
  • Honeywell said the division is expected to have fiscal 2024 revenue between $3.7 billion and $3.9 billion, with an EBITDA margin above 25%. As a standalone firm, it would be able to pursue acquisitions that align with it, or even become a takeover target.

Not Yet: The spinoff is expected to be completed by late 2025 or early 2026. Honeywell shares rose around 2% on Tuesday, though they are still down about 1% this year. The company slashed its fiscal 2024 earnings guidance in July, offsetting second-quarter sales and profit numbers that beat expectations.