Honeywell's Strategic Split: Unlocking Value and Focusing on Core Competencies

Honeywell International Inc. (HON), one of the last remaining U.S. industrial conglomerates, has announced its plans to split into three independent companies, focusing on automation, aerospace, and advanced materials. This strategic move, expected to be completed in the second half of 2026, aims to unlock significant shareholder value and better position each business to capitalize on global megatrends. The separation follows a broader trend of large industrial conglomerates opting for breakups to focus on niche markets and enhance competitiveness.

Honeywell's decision to split its businesses comes after pressure from activist investor Elliott Investment Management, which holds a substantial $5 billion stake in the company. The planned separation is expected to create three publicly listed industry leaders with distinct strategies and growth drivers, each benefiting from a simplified strategic focus, greater financial flexibility, and improved capital allocation priorities (Honeywell, 2025).

The three new companies will be:

1. Honeywell Automation: Focusing on the global transition from automation to autonomy, this company will maintain global scale with 2024 revenue of $18 billion. Honeywell Automation will connect assets, people, and processes to power digital transformation, building on decades-long technology leadership positions, deep domain experience, and a vast installed base to serve a variety of high-growth verticals (Honeywell, 2025).
2. Honeywell Aerospace: As one of the largest publicly traded, pure-play aerospace suppliers, this company will have leading positions in technology and systems, with $15 billion in annual revenue in 2024. Honeywell Aerospace will continue to deliver the future of aviation through increasing electrification and autonomy of flight, with a large, global installed base (Honeywell, 2025).
3. Advanced Materials: A sustainability-focused specialty chemicals and materials pure play, this company will have leading positions across fluorine products, electronic materials, and other high-growth segments. The Advanced Materials business will be well-positioned to unlock greater long-term value for shareholders, with a focused board of directors and management team with deep domain expertise (Honeywell, 2025).

The planned separations are expected to be completed in a tax-free manner to Honeywell shareholders, ensuring that the transaction does not impose additional financial burdens on investors (Honeywell, 2025). This strategic move aligns with broader industry trends and is expected to result in better market positioning, clearer strategic focus, and improved financial performance for each of the three companies.

Analysts like those at Barclays have estimated a sum-of-the-parts valuation reaching about $270 per share based on expected free cash flows, which is notably higher than Honeywell's recent stock price, suggesting that the market might be undervaluing the conglomerate's individual businesses (Bloomberg, 2025). This potential value unlocking, coupled with the strategic advantages of focused operations and clearer market positioning, makes the separation an attractive proposition for Honeywell and its shareholders.

In conclusion, Honeywell's strategic decision to split into three independent companies is expected to have a positive impact on the company's long-term growth and shareholder value. By enabling each business to have a simplified strategic focus, greater financial flexibility, improved capital allocation priorities, and distinct investment profiles, the separation aligns with broader industry trends and is expected to result in better market positioning, clearer strategic focus, and improved financial performance for each of the three companies. This strategic move is a testament to Honeywell's commitment to enhancing competitiveness and unlocking value for its shareholders.