Honeywell has announced a plan to spin off its Advanced Materials business into an independent, US publicly traded company which will be fully operational by late 2025 or early 2026.
Honeywell expects to execute the planned spin in a tax-free manner to its shareholders.
As a leading global provider of sustainability-focused specialty chemicals and materials, this pure-play business will be well-positioned to benefit from an enhanced strategic focus and the financial flexibility to pursue innovation and growth opportunities through investment cycles.
Further, the planned spin-off will enable Honeywell to progress its strategic priorities of accelerating organic growth, evolving its Accelerator operating system, and optimising its portfolio.
Chair & CEO of Honeywell, Vimal Kapur, said the new company will have a greater strategic focus on innovation, enabling it to develop new, more sustainable solutions and products with next generation chemistry creating further value for shareholders.
“Given the sustained market demand for advanced specialty chemicals and materials around the globe, we are confident now is the right time for this business to grow independently, leveraging its leading technologies and deep customer relationships,” Kapur said.
“Today's announcement is the latest step in the optimisation of the Honeywell portfolio, a key priority I laid out in my first year leading the company.
“Through the powerful combination of strategic bolt-on acquisitions and subtractions of high quality but non-core business lines, we continue to enhance our portfolio mix and further tighten Honeywell's alignment to three compelling megatrends: automation, the future of aviation, and energy transition—underpinned by our Accelerator business models."
The planned spin-off is expected to create value for all stakeholders as both Honeywell and the Advanced Materials business will benefit from:
- A simplified strategic focus;
- A greater financial flexibility to pursue prioritized organic growth opportunities throughout investment cycles;
- An improved ability to customize capital allocation priorities in alignment with strategic focus; and
- Distinct investment profiles that position each company to unlock greater long-term value for shareowners.
The planned spin-off of the Advanced Materials business follows four recent acquisitions Honeywell announced as part of its disciplined capital deployment strategy.
The company is focused on high-return acquisitions that will drive future growth across its portfolio in alignment with the three powerful megatrends. In the past 12 months, Honeywell completed the acquisitions of Carrier Access Solutions, Civitanavi, CAES and Air Products’ liquified natural gas (LNG) business.
Honeywell is currently on pace to exceed its commitment to deploy at least $US25 billion toward high-return capital expenditures, dividends, opportunistic share purchases and accretive acquisitions through 2025, with approximately $US9 billion deployed towards acquisitions to date in 2024.
Following the completion of the planned spin of the Advanced Materials business, Honeywell will be positioned to further improve its organic sales growth, lower capital intensity, reduce cyclicality of sales and enhance free cash flow generation capability.
Upon completion of the spin-off, the Advanced Materials business will be a sustainability-focused specialty chemicals and materials pure play with leading positions across fluorine products, electronic materials, industrial grade fibres, and healthcare packaging solutions.
The business offers technologies that include the breakthrough low global warming Solstice hydrofluoro-olefin (HFO) technology, which has helped avoid the potential release of the equivalent of more than 326 million metric tonnes of carbon dioxide into the atmosphere.
Additionally, the business manufactures a wide variety of high-performance specialty materials technologies ranging from Spectra, a fibre used in high-end armour technology to protect in law enforcement and military applications, to Hydranal, the most trusted brand in Karl Fischer titration, to Aclar, a high-performance pharmaceutical packaging material critical to preserving prescription drugs and keeping them safe.
Advanced Materials is expected to have FY24 estimated revenue of between $US3.7 billion and $3.9 billion with an EBITDA margin greater than 25 per cent.
As a standalone company with a large-scale domestic manufacturing base, it will be positioned to benefit from a compelling investment profile and a more flexible and optimised capital allocation strategy.
The planned spin-off transaction is targeted for completion by the end of 2025 or early 2026, subject to certain customary conditions. Approval by Honeywell's shareowners is not required.
The spin transaction will not impact Honeywell's FY24 guidance.