Honeywell to Spin Off Homes Portfolio, ADI Global by End of 2018
Honeywell’s Home and Global Distribution business will include home and building security systems, connected home portfolio and life-safety products among others.
MORRIS PLAINS, N.J. — Honeywell reveals that after a comprehensive portfolio review, it intends to separately spin off its Homes product portfolio and ADI global distribution business, as well as its Transportation Systems business, into two standalone, publicly-traded companies.
The Homes and Global Distribution business will include home heating, ventilation and air conditioning controls, as well as security markets and security and fire protection products. It will have about 13,000 employees and is expected to have annualized revenue of approximately $4.5 billion, according to the company.
The Transportation Systems business will serve a range of engine types across global automobile, truck and other vehicle markets and will have about 6,500 workers.
“Today’s announcement marks the culmination of a rigorous portfolio review involving a detailed assessment of every Honeywell business. As part of that review, we analyzed numerous criteria, including growth outlook, financial performance, market dynamics, potential for disruption, and, most importantly, assessment of fit as a Honeywell business,” says Honeywell President and CEO Darius Adamczyk.
According to a shareholder presentation, strategic rationale for the Homes and Global Distribution separation include:
- More opportunities to grow inorganically through targeted capital allocation
- Investment optimization to capture evolving end market dynamics
- Improved focus on B2C and distribution business segments
Honeywell says the spin-off creates a more focused, growth-oriented and synergistic portfolio that creates clear opportunities for further scale in every business.
Adamczyk says the reduced size will allow for rapid organic growth at Honeywell and its spin-offs and expects more aggressive capital deployment.
“Our simplified portfolio will offer multiple platforms for organic growth and margin expansion through further deployment of our world-class HOS Gold operating system and the Honeywell Sentience Platform. Honeywell will also have multiple levers for continuing to execute an aggressive capital deployment strategy, including a vigorous and disciplined M&A program,” explains Adamczyk.
The planned separation transactions are intended to be tax-free spins to company shareowners for U.S. federal income tax purposes and are expected to be completed by the end of 2018.
Honeywell Previews Q3 Results
Honeywell also announced during its shareholder conference call that it anticipates strong third-quarter results.
Sales are expected to be $10.1 billion, up 3% reported and up 5% organic, and earnings per share is expected to be $1.75, up 9% reported and up 16% ex-divestitures, normalized for tax at 26%, driven by strong results at its Aerospace and Performance Materials and Technologies business groups.
The company also raised the low-end of its full-year 2017 earnings per share guidance by 5 cents to a new range of $7.05 – $7.10, excluding any pension mark-to-market adjustment.
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