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Honeywell, spin off, next General Electric? Opportunity? Division into 3 new companies: Materials, Automation and Aviation.
In 2021, General Electric decided to dismantle its historic conglomerate by dividing it into three autonomous companies: GE Aerospace, GE Vernova and GE HealthCare.
The overall capitalization of the three companies rose to around 474 billion dollars, compared to 290 billion before the split. In other words, the market recognized over 180 billion in additional value thanks to the separation.
Why does this happen? There are three main reasons. First: conglomerates often suffer from a market "discount", because investors struggle to give the right value to very different businesses. By separating them, each company becomes more readable and comparable to direct competitors. Second: capital management improves, because each entity can invest without having to compromise with the needs of other divisions. Third: a dedicated board of directors and management can move with greater clarity and accountability.
Let's talk about Honeywell. Today the company is organized into four major areas: Aerospace, Safety and Productivity Solutions, Building Technologies and Energy and Sustainability. Translated into a post-spinoff scenario, we could imagine three companies: Honeywell Aerospace, Honeywell Automation (which would combine the first two non-aerospace divisions), and Solstice Advanced Materials, focused on specialty chemistry and decarbonization technologies.
The shareholder letter decided to give 1 share of solstice for each share of Honeywell. The split of the other 2 divisions is expected at the end of 2026.
The Aerospace segment is by far the strongest and represents the main source of revenue. Honeywell supplies avionics, engines and auxiliary systems to giants such as Boeing and Airbus, but also to military aircraft and even future eVTOLs such as those from Joby Aviation. In addition to this, a significant portion comes from after-sales services: maintenance, repairs and overhauls which guarantee recurring flows.
Honeywell Automation, on the other hand, would focus on industrial automation, intelligent warehouses and security solutions. Think of scanners, robotics and voice-picking systems in Amazon warehouses, gas detectors and PPE for industrial workers, or energy and fire management systems for complex buildings such as airports and university campuses.
Finally, Solstice Advanced Materials would represent the “greener” and more futuristic side: CO₂ capture, green hydrogen, advanced battery materials and sustainable chemical solutions. A reality in its own right, with a positioning perfectly in line with the ESG priorities of global investors.
For an investor there are three paths. The first is to buy Honeywell shares now and wait for the split, then deciding whether to keep all the companies or sell the less interesting ones. The second is to wait for the spin-off and bet directly on the most promising horse, which in all likelihood will be Aerospace. The third is to mix.
#business
In 2021, General Electric decided to dismantle its historic conglomerate by dividing it into three autonomous companies: GE Aerospace, GE Vernova and GE HealthCare.
The overall capitalization of the three companies rose to around 474 billion dollars, compared to 290 billion before the split. In other words, the market recognized over 180 billion in additional value thanks to the separation.
Why does this happen? There are three main reasons. First: conglomerates often suffer from a market "discount", because investors struggle to give the right value to very different businesses. By separating them, each company becomes more readable and comparable to direct competitors. Second: capital management improves, because each entity can invest without having to compromise with the needs of other divisions. Third: a dedicated board of directors and management can move with greater clarity and accountability.
Let's talk about Honeywell. Today the company is organized into four major areas: Aerospace, Safety and Productivity Solutions, Building Technologies and Energy and Sustainability. Translated into a post-spinoff scenario, we could imagine three companies: Honeywell Aerospace, Honeywell Automation (which would combine the first two non-aerospace divisions), and Solstice Advanced Materials, focused on specialty chemistry and decarbonization technologies.
The shareholder letter decided to give 1 share of solstice for each share of Honeywell. The split of the other 2 divisions is expected at the end of 2026.
The Aerospace segment is by far the strongest and represents the main source of revenue. Honeywell supplies avionics, engines and auxiliary systems to giants such as Boeing and Airbus, but also to military aircraft and even future eVTOLs such as those from Joby Aviation. In addition to this, a significant portion comes from after-sales services: maintenance, repairs and overhauls which guarantee recurring flows.
Honeywell Automation, on the other hand, would focus on industrial automation, intelligent warehouses and security solutions. Think of scanners, robotics and voice-picking systems in Amazon warehouses, gas detectors and PPE for industrial workers, or energy and fire management systems for complex buildings such as airports and university campuses.
Finally, Solstice Advanced Materials would represent the “greener” and more futuristic side: CO₂ capture, green hydrogen, advanced battery materials and sustainable chemical solutions. A reality in its own right, with a positioning perfectly in line with the ESG priorities of global investors.
For an investor there are three paths. The first is to buy Honeywell shares now and wait for the split, then deciding whether to keep all the companies or sell the less interesting ones. The second is to wait for the spin-off and bet directly on the most promising horse, which in all likelihood will be Aerospace. The third is to mix.
#business
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