Honeywell, a major player in the aerospace industry, revealed on Thursday its plan to separate into three independent publicly traded entities.

The company will establish Honeywell Automation and Honeywell Aerospace, alongside a previously announced spin-off of Advanced Materials.

Vimal Kapur, Chairman and CEO of Honeywell, stated in a press release, “Creating three independent, industry-leading companies enhances the strong groundwork we’ve laid, positioning each to pursue unique growth paths and deliver substantial value for both shareholders and customers.”

The firm shared that the division of the two newly introduced companies is set for completion in the latter half of 2026 and will be tax-free for Honeywell shareholders. The spin-off of the Advanced Materials unit is expected to wrap up by late 2025 or early 2026.

What will each new company focus on?

Here’s a breakdown of the roles of the three upcoming companies:

• Honeywell Automation: This entity will focus on providing automation solutions, assisting factories and warehouses in upgrading their operations. This sector has been facing slow demand as the pandemic-driven surge in e-commerce begins to stabilize.
• Honeywell Aerospace: This company will operate as a dedicated aerospace supplier. The aerospace division is Honeywell’s largest revenue contributor, representing about 40% of the total revenue in 2024, with Boeing and Airbus among its clients.
• Advanced Materials: Honeywell described Advanced Materials as a company focused on sustainable specialty chemicals and materials, which generated nearly $4 billion in revenue last year.

Separation influenced by activist investor pressure

This separation follows the recent actions of activist investor Elliott Management, which purchased a $5 billion stake in Honeywell.

Even after several minor strategic changes, Elliott, which holds its largest investment in Honeywell, contended that the company required a division.

Honeywell’s stock performance had attracted Elliott’s focus, as it lagged behind market trends. The company’s shares increased by 7.7% in 2024 up to November 11, just before Elliott revealed its investment, while the wider market surged by 26.6% during the same timeframe.

Elliott’s involvement isn’t the first instance of activist pressure on Honeywell regarding a breakup. In 2017, the company successfully resisted Daniel Loeb’s Third Point, which advocated for the separation of its aerospace division.

Contributing: Reuters