Elliott takes $5bn stake in Honeywell, urges split into two businesses

Activist investor Elliott Investment Management called on Honeywell International to break itself up on Tuesday, as it said it had taken a $5bn stake in the company.

In a letter to the company’s board of directors, Elliott called for a "simplification" of Honeywell's conglomerate structure.

It said that in order to realise its full potential, Honeywell should separate itself into two businesses: 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," it said.

Elliott - now Honeywell’s largest active investor - said a separation could result in share price upside of 51-75% over the next two years, "a remarkable improvement for any business, let alone a $150 billion industrial bellwether".

As independent entities, the Aerospace and Automation arms 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, it said.

Elliott wrote: "Honeywell is at an inflection point. While its performance has lagged, its market positioning remains sound, and comparable valuations continue to reach new highs. The case for change is clear and compelling, and the path to achieving that change is straightforward: allowing Honeywell Aerospace and Honeywell Automation to stand on their own.

"We hope you share our view - and the growing market consensus - that now is the right time for Honeywell to take this step in its evolution."

At 1545 GMT, Honeywell shares were up 4.5% at $235.32.