Honeywell to Receive $1.59 Billion Payment from Resideo in 2025, Enhancing Earnings and Free Cash Flow

Resideo Technologies will pay Honeywell International $1.59 billion by 2025 to settle all prospective financial obligations under their 2018 indemnification agreement. This move will conclude Resideo's indemnification duties, remove existing covenants, and enhance its adjusted earnings per share and free cash flow. Resideo will fund the payment using available cash and new senior secured debt financing.

Title: Resideo Technologies Settles with Honeywell, Enhances Financial Flexibility

Resideo Technologies (NYSE: REZI) has announced a significant agreement with Honeywell International Inc. (NASDAQ: HON) to settle all prospective financial obligations under their 2018 Indemnification and Reimbursement Agreement. The company will make a one-time payment of $1.59 billion in Q3 2025, effectively eliminating annual payments of up to $140 million through 2043.

The agreement, which will be financed through $400 million in cash-on-hand and new senior secured debt financing from J.P. Morgan and Wells Fargo, marks a strategic financial move for Resideo. By eliminating these long-term obligations, the company is trading a structured, predictable long-term liability for an immediate payment. This transaction is expected to be immediately accretive to adjusted earnings per share (EPS) and free cash flow, suggesting that the interest costs on the new debt will be lower than the annual $140 million obligation.

Resideo's current liquidity position remains robust, with approximately $750 million in cash as of June 28, 2025. Using $400 million for the payment leaves Resideo with adequate liquidity while optimizing its capital structure.

This financial restructuring also enables Resideo's second major announcement – the planned tax-free spin-off of its ADI Global Distribution business. The elimination of the Honeywell agreement's restrictive covenants appears to have been a prerequisite for executing this separation strategy, which aims to create two focused public companies and potentially unlock shareholder value.

The timing of these announcements is particularly strategic given Resideo's strong Q2 performance, with results expected to exceed the high end of previous guidance for revenue, adjusted EBITDA, and adjusted EPS. This performance strength provides Resideo with the financial confidence to undertake these significant structural changes.

References

[1] https://www.stocktitan.net/news/REZI/resideo-signs-agreement-to-accelerate-payment-of-all-potential-wn1tmbszlgzp.html
[2] https://www.tradingview.com/news/tradingview:ff4e213b947c3:0-resideo-technologies-officer-sells-47-000-shares/
[3] https://www.investing.com/news/company-news/resideo-to-pay-159-billion-to-honeywell-ending-future-obligations-93CH-4159459