CHARLOTTE, N.C. – Honeywell (NASDAQ: HON) revealed plans today to create an independent company by spinning off its Advanced Materials business, targeting completion by the end of 2025 or early 2026. The new entity is expected to generate about $3.8 billion in revenue with an EBITDA margin over 25% for the fiscal year 2024.
The spin-off will enable Honeywell to concentrate on its core megatrends, including automation, the future of aviation, and energy transition. Vimal Kapur, Chairman and CEO of Honeywell, expressed confidence in the timing of the spin-off, citing sustained global demand for advanced specialty chemicals and materials. Kapur highlighted the move as part of Honeywell's ongoing strategy to optimize its portfolio, emphasizing the company's commitment to strategic acquisitions and divestitures that align with these megatrends.
The Advanced Materials business boasts leading brands like Solstice®, Spectra®, Hydranal®, and Aclar®, with a focus on sustainability and innovation. The business is recognized for its Solstice® hydrofluoro-olefin technology, which has significantly reduced potential carbon dioxide emissions.
Honeywell anticipates that the spin-off will offer both companies enhanced strategic focus, financial flexibility, and distinct investment profiles, potentially increasing long-term value for shareholders. The transaction is expected to be tax-free for Honeywell shareholders and is subject to customary conditions, including SEC filings and regulatory approvals.
The company has been active in acquisitions, with approximately $9 billion deployed towards such investments in 2024, as part of its commitment to deploying at least $25 billion by 2025. These acquisitions are aimed at driving future growth aligned with Honeywell's strategic megatrends.
Honeywell will discuss the transaction details in an investor conference call, with a webcast available on the company's website. The spin-off is not expected to affect Honeywell's FY24 guidance, and further information on the future management team and board of directors of the Advanced Materials company will be provided as the process advances.
This news is based on a press release statement from Honeywell.
In other recent news, Honeywell International Inc (NASDAQ:HON). has made significant strides in its business operations. The company has announced plans to spin off its advanced materials business, a strategic decision aimed at streamlining operations and focusing on core businesses. Furthermore, Honeywell has raised its annual cash dividend from $4.32 to $4.52 per share, marking the 15th dividend increase in 14 consecutive years and demonstrating the company's consistent strategy of delivering shareholder value.
Honeywell has also partnered with Qualcomm (NASDAQ:QCOM) Technologies to develop a Multi-Modal Intelligent Agent for Honeywell mobile devices, a move expected to boost efficiency in distribution centers and retail industries. Additionally, the U.S. Energy Department has awarded Honeywell $126.6 million to establish a facility in Louisiana for producing a crucial electrolyte salt used in lithium batteries. This investment is part of a larger initiative to bolster domestic battery production and reduce dependency on China.
In terms of stock analysis, Mizuho Securities has maintained an Outperform rating on Honeywell, suggesting potential for mergers and acquisitions. Conversely, Morgan Stanley initiated coverage with an Equalweight rating, expressing caution about the company's near-term recovery prospects. These recent developments highlight Honeywell's ongoing business operations and strategies.
InvestingPro Insights
As Honeywell (NASDAQ: HON) prepares to spin off its Advanced Materials business, investors may find additional context from InvestingPro's real-time data and tips particularly insightful.
Honeywell's current market capitalization stands at $132.1 billion, reflecting its significant presence in the industrial sector. The company's P/E ratio of 22.97 suggests that investors are willing to pay a premium for its earnings, possibly due to its strong market position and growth prospects in key areas like automation and energy transition.
An InvestingPro Tip highlights that Honeywell "operates with a moderate level of debt," which could be advantageous as it navigates the spin-off process and continues its strategic acquisitions. This financial flexibility aligns with the company's plans to deploy $25 billion towards investments by 2025.
Another relevant InvestingPro Tip notes that Honeywell "has maintained dividend payments for 40 consecutive years." This impressive track record of consistent dividends, coupled with a current dividend yield of 2.22%, may reassure investors about the company's financial stability during this transition period.
The spin-off strategy seems to be in line with Honeywell's focus on optimizing its portfolio for long-term value creation. With a revenue of $37.33 billion in the last twelve months and a gross profit margin of 37.56%, Honeywell appears well-positioned to execute this strategic move while maintaining its financial health.
For investors seeking a deeper understanding of Honeywell's financial position and growth potential, InvestingPro offers 10 additional tips, providing a comprehensive analysis to inform investment decisions during this transformative period for the company.
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