Honeywell To Buy Sparta Systems For $1.3B; Stock Up 17% YTD

Honeywell International announced the acquisition of privately-held Sparta Systems, an enterprise quality management software company, from New Mountain Capital, in a $1.3 billion cash deal.

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Honeywell (HON) said that it intends to utilize Sparta Systems’ software-as-a-service (SaaS) platform to enhance its life sciences division capabilities and expand into newer markets.

“Sparta Systems is an ideal complement to our life sciences portfolio,” said Rajeev Gautam, CEO of Honeywell Performance Materials and Technologies. “While Sparta’s capabilities will initially help us expand our capabilities for our existing breakthrough initiative in life sciences, we plan to leverage Honeywell’s global footprint and expertise to quickly expand Sparta’s capabilities to serve other markets.”

The multinational conglomerate expects the transaction to be completed in the first quarter of 2021. Honeywell stated that there would be no change in its 2020 financial outlook following the acquisition. (See HON stock analysis on TipRanks).

Last month, Robert W. Baird analyst Peter Arment raised the stock’s price target to $221 (6.3% upside potential) from $167 and reiterated a Buy rating. Arment believes that a recovery in growth along with cost-cutting initiatives are likely to boost Honeywell’s earnings over the long-term. The analyst also expects the company to go for significant merger & acquisition activities next year.

Currently, the Street has a cautiously optimistic outlook on the stock. The Moderate Buy analyst consensus is based on 9 Buys and 6 Holds. The average price target stands at $209.64 and implies that shares are almost fully priced at current levels. Shares have gained 17.5% year-to-date.