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Elliott Management has built a $5bn stake in Honeywell International, placing its largest ever bet as it looks to break up the $164bn industrial conglomerate.
The US activist investor, which revealed its position on Tuesday, wants North Carolina-based Honeywell to split into two businesses: its aerospace division, which supplies aircraft equipment, and automation, which sells tools for warehouses and other plants.
The investment underlines Elliott’s growing number of concentrated bets; it has drawn on its $69bn in assets to take multibillion-dollar stakes this year, ranging from $2.5bn in chipmaker Texas Instruments and a $2bn stake in Southwest Airlines.
Honeywell’s board and management “acknowledge and appreciate the perspectives of all our shareholders,” a spokesperson said: “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.”
Honeywell’s chief executive, Vimal Kapur, has signed off on $9bn worth of acquisitions since his appointment last year. At the same time, he has moved to divest one of Honeywell’s largest units, the chemical and materials maker Advanced Materials, saying the group would continue to simplify its portfolio to focus on “three compelling megatrends”: automation, the future of aviation and the energy transition.
Elliott is seeking to speed up that transformation. “The conglomerate structure that once suited Honeywell no longer does, and the time has come to embrace simplification,” Elliott’s Jesse Cohn and Marc Steinberg said in a letter on Wednesday.
Industry analysts said Honeywell was the last remaining holdout among a group of industrial conglomerates that have already broken up, boosting their valuations. A break-up would follow moves to split other leading industrial groups, including GE’s spin-off of its power and renewable energy business and 3M’s spin-off of its healthcare business.
“Independent businesses come with focused management teams and boards,” said Julian Mitchell, an equity analyst at Barclays. “It’s easier for investors to track trends in those businesses and invest in those stocks.”
Honeywell’s shares were up about 4 per cent after news of Elliott’s investment. The stock has lagged the wider market this year, rising 12 per cent since the start of this year while the S&P 500 has risen 26 per cent.
