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US industrials group Honeywell is close to securing a £1.8bn all-cash deal to buy the catalyst technologies arm of FTSE 250 chemicals company Johnson Matthey.
The unit, which develops catalysts that improve the efficiency of chemical manufacturing processes, will be folded into Honeywell’s automation unit, according to people familiar with the matter. Analysts expect the business to generate nearly £613mn in revenues in the year to the end of March.
The acquisition would be the latest in a series of takeovers in which US groups have scooped up UK assets. London’s mid-cap FTSE 250 has proven to be a particularly fertile hunting ground.
This year, US-based American Axle & Manufacturing struck a £1.2bn deal to buy UK automotive parts manufacturer Dowlais Group, and DoorDash agreed to buy UK food delivery service Deliveroo for £2.9bn.
Johnson Matthey’s catalyst technologies unit is expected to be combined with Honeywell’s UOP brand, which specialises in developing technologies including catalysts for use in petroleum refining and gas processing, the people added.
Johnson Matthey confirmed on Wednesday that it was in “advanced discussions” about a possible sale, but did not identify the buyer. A deal was likely to be announced at the company’s annual results on Thursday, the people added.
Honeywell and Johnson Matthey did not immediately respond to requests for comment.
Shares in Johnson Matthey stand at a third of their all-time high from 2018, having fallen nearly 24 per cent in the past year, following a series of unsuccessful acquisitions, bumpy earnings and margin pressures in some of its businesses, especially its clean air business, its largest division.
Languishing performance led Johnson Matthey to become the target of an activist campaign by its largest shareholder Standard Investments, which published an open letter to the board last December calling for the company to launch a strategic review “exploring all potential paths for maximizing shareholder value”, including a full or partial sale. Johnson Matthey already sold its medical device manufacturing arm to private equity group Montagu early last year.
Honeywell, one of the few remaining US conglomerates, earlier this year unveiled its own plans to break up into three separate units as part of an agreement with activist hedge fund Elliott Management, which took a $5bn stake in the business, its biggest position ever. The company makes everything from aviation equipment to air conditioning control systems and has a market capitalisation of about $145bn.
Under the leadership of chief executive Vimal Kapur, Honeywell is poised to make its sole focus automation by the end of next year. First, Honeywell plans to spin off its Solstice Advanced Materials unit as a separate listed company, which could be worth as much as $10bn, by early 2026 at the latest. Then, Honeywell will break up its automation and aerospace technologies businesses into two separate businesses by the end of next year.
As part of its efforts to streamline its operations around aerospace, aviation and energy-focused technologies, Kapur has divested some parts of the business and decided to acquire other assets. Honeywell sold its personal protective equipment arm to Protective Industrial Products for $1.3bn.
Meanwhile, Honeywell has also been on a $11bn acquisition spree since December 2023, including the $2.1bn buyout of pump manufacturer Sundyne and the $1.9bn takeover of defence electronics group CAES Systems Holdings.