Elliott confirms $5B+ stake in Honeywell, urges ‘simplification’ of structure

Elliott Investment Management L.P., which manages funds that together have made an investment of more than $5B in Honeywell (HON) International, sent a letter to its Board of Directors calling for a simplification of Honeywell’s conglomerate structure. “Honeywell is an iconic pillar of the American industrial complex and remains a world-class company with market-leading assets, Elliott wrote. But uneven execution, inconsistent financial results and an underperforming share price have diminished the company’s strong record of value creation over the last five years. The conglomerate structure that once suited Honeywell no longer does, and the time has come to embrace simplification. In order to realize its full potential, Elliott recommended that Honeywell pursue a separation of Aerospace and Automation. Both entities would be sector leaders and be better positioned to thrive operationally, serve customers and employees, and create long-term value for shareholders. As independent entities, Honeywell Aerospace and Honeywell Automation would benefit from simplified strategies, focused management, improved capital allocation, better operational performance, enhanced oversight, and numerous other benefits now enjoyed by dozens of large businesses that have moved on from the conglomerate structure, including former conglomerates General Electric, United Technologies, and many more. According to the letter, Elliott believes there is a tremendous opportunity for value creation at Honeywell. This includes an enhanced strategic focus that will allow each company to drive improved operating performance and, a set of simplified investment narratives that will deliver superior valuations. Elliott believes a separation of Aerospace and Automation would result in share-price gains of 51% – 75% over the next two years. Elliott said it hopes its letter to Honeywell is received in the same spirit in which it was sent: A desire to work together to help Honeywell achieve its full potential. Elliott requested an opportunity to meet with the company to advance the shared commitment to Honeywell’s success.”