Fund manager Elliott Investment Management wants Honeywell broken up, with the group’s aerospace division established as a separate business. Yesterday, Elliott wrote to the board of Honeywell International calling for “a simplification of Honeywell’s conglomerate structure” in a move that it said would boost the share price over the next two years by between 51% and 75%.
“Uneven execution, inconsistent financial results, and an underperforming share price have diminished the company’s strong record of value creation over the last five years,” Elliott argued. It pointed out that the funds it manages have invested more than $5 million in the industrial group, which is active in many sectors beyond aerospace and defense.
While acknowledging Elliott’s comments, Honeywell International gave little indication that it intends to embrace the proposed change. “Honeywell’s board of directors and management acknowledge and appreciate the perspectives of all our shareholders,” the group said in a written response. “Although Elliott had not made us aware of their views prior to today, we look forward to engaging with the firm to obtain their input. Our leadership welcomes investor feedback as we continue to execute a disciplined strategy, which includes pursuing sustainable growth, optimizing the portfolio, and maintaining an accretive capital deployment program.”
Elliott’s letter to the Honeywell board provides a detailed analysis of what it regards as shortcomings in the group’s performance and structure.