Dow Jones conglomerate Honeywell International on Tuesday announced plans to spin off its advanced materials division into an independent, publicly-traded U.S. company. Honeywell stock surged early Tuesday on the news.
Charlotte, N.C.-based Honeywell targets an end of 2025 or early 2026 spinoff, which it expects to execute in a tax-free manner to its shareholders. Honeywell said the pure-play specialty chemicals and materials business will be well-positioned to benefit from strategic focus and financial flexibility to pursue growth opportunities.
The move simplifies Honeywell's business around its core themes of aviation, automation and the energy transition. The spinoff also creates opportunities to accelerate organic growth, evolve its accelerator operating system, and optimize its portfolio, Honeywell said.
The advanced materials business could be worth more than $10 billion as a separate, public company, according to unnamed sources quoted by the Wall Street Journal reported.
"Given the sustained market demand for advanced specialty chemicals and materials around the globe, we are confident now is the right time for this business to grow independently, leveraging its leading technologies and deep customer relationships," CEO Vimal Kapur said in the release.
Honeywell expects the advanced materials business to generate revenue between $3.7 billion and $3.9 billion in 2024, with an EBITDA margin greater than 25%. The portfolio includes the Solstice brand, Spectra, Hydranal, and Aclar, among others.
The announcement comes amid a Honeywell acquisition spree. Over the last 12 months, Honeywell acquired Carrier Access Solutions, Civitanavi, CAES and Air Products' liquefied natural gas business.
Meanwhile, Honeywell is on track to exceed its commitment to deploy $25 billion in capital expenditures, dividends, share repurchases, and accretive acquisitions through 2025. So far, The Dow giant deployed $9 billion toward acquisitions to-date in 2024.
Honeywell Stock Rises
Honeywell stock swung 1.8% higher Tuesday on the news. Shares jumped 2.8% before the opening bell and led the Dow Jones Industrial Average in premarket trade.
Shares are attempting to start up the right side of a three-month consolidation. The stock has looped through a series of consolidations since marking is record high in August 2021. It has managed to hold above 40-week support since February.
For this year, HON stock has fallen about 6% from its late July highs, notching a 1.3% decline on the year through Tuesday.
GE Spinoff
Honeywell's announcement comes after Dow giant GE completed its series of highly-anticipated spinoffs earlier this year. The conglomerate first announced its split in 2021 and GE HealthCare began trading as an independent company in January 2023. GE Vernova, which focuses on electrical power systems, launched on April 2 this year, while GE Aerospace kept the GE ticker.
Since the splits, GEHC stock has rallied nearly 64%. GEV stock rocketed 128%. GE Aerospace leapt 84% so far this year.
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