Shares of Honeywell International sprang to a record high on Tuesday, fueled by the news that Elliott Investment Management has formed an over $5 billion stake in the industrial conglomerate and is advocating for its disintegration. In a formal letter to Honeywell's board of directors, Elliott stated their call for the aerospace and automation businesses to be segregated into two separate entities.
Elliott cited potential share price enhancements of 51% to 75% over the forthcoming two years due to targeted management and streamlined structure, from the prospective split of the two companies. The hedge fund firm indicated that Honeywell's once effective conglomerate framework has fallen short of expectations over recent years, highlighting sporadic operational performance, inconsistent financial outcomes, and a stock price that hasn't mirrored the company's strong value creation record over the past five years.
Honeywell is one of the last remaining industrial conglomerates that has not undergone a breakup. Still, it publicized plans last month to refine its enterprise and spin off its cutting-edge materials sector. Other revered industrial conglomerates have seen their share prices surge following dismantlements. Case in point, General Electric’s three-way breakup wrapped up earlier this year, leading to a significant rise in the shares of its now independent enterprises.
Elliott's stake in Honeywell is one of its largest-ever single investments in a company, making the hedge fund one of Honeywell's top five shareholders. Honeywell, based in Charlotte, N.C., recorded below-projected sales last quarter and decreased its revenue forecast due to slumped demand for its industrial automation products. However, Honeywell shares were up 4.6% on Tuesday morning and have risen more than 12% this year.