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Honeywell's Major Corporate Shakeup Creates Two New Units, But Keeps Aerospace Business

Madeleine Johnson
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On Tuesday, technology and manufacturing giant Honeywell HON announced major changes to its corporate structure. The company, known for its services and software across a number of different industries, is planning on spinning off parts of its business in order to create two new publicly-traded companies by the end of 2018.

After a full portfolio review, Honeywell decided to spin off its home and ADI global distribution unit, which pulls in $4.5 billion in annual revenues, and its transportation systems unit, which has about $3 billion in revenue. The new, separate home business will focus on heating, ventilation, and air-conditioning, and the distribution of security and fire protection products; the new transportation company will deal with technologies used in a wide range of vehicles.

In a news release, Honeywell president and chief executive Daruis Adamczyk said that the new companies will be “better positioned to maximize share-owner value through focused strategic decision making and capital allocation tailored for their end markets.”

Honeywell also announced that it would be keeping its aerospace technology business, a decision that went against the recommendation of activist investor Daniel Loeb. For months now, Loeb and hedge fund Third Point have placed pressure on Honeywell to overhaul its business, in particular to spin off its aerospace unit. Loeb believed that the move would “result in an increase in shareholder value in excess of $20 billion,” notes TheStreet.

However, Loeb will likely be partially satisfied with Honeywell’s final decision, but if he isn’t, he would have to wait until the company’s 2018 annual meeting to make any dissenting moves, added The Street.

Additionally, Honeywell raised the low-end of its full-year 2017 earnings guidance by five cents to the range of $7.05 to $7.10 per share, saying it would spend the proceeds from the spinoffs on acquisitions, share buybacks, and paying down debt.

Shares of Honeywell are up a slight 0.20% in mid-morning trading, but have gained well over 23% so far in 2017.

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