Honeywell plans to become the next Dow component to conduct a spinoff

By Emily Bary

Honeywell intends to spin off its advanced materials business, following Johnson & Johnson and Dow

Honeywell International Inc. intends to spin off its advanced materials unit in a bid to simplify the focus of both businesses and give them more financial flexibility.

The industrial company announced the planned move on Tuesday morning, saying in a release that it expects the spinoff to take place by the end of 2025 or the beginning of 2026. It will be conducted in a tax-free manner.

"Given the sustained market demand for advanced specialty chemicals and materials around the globe, we are confident now is the right time for this business to grow independently, leveraging its leading technologies and deep customer relationships," Honeywell Chief Executive Vimal Kapur said in a release.

The advanced materials business includes brands such as Solstice and Spectra and have estimated 2024 sales of $3.8 billion and a 25% operating margin.

Honeywell's remaining business will be focused on aerospace technologies, industrial automation and building automation, and be less cyclical and require lower capital intensity.

Honeywell (HON) said the two businesses will have a greater ability to target their capital-allocation profiles to their respective goals. The businesses will also be able to set their own investment profiles in a way that can drive shareholder value, according to Honeywell's release.

Read: Stock buyback programs surge in popularity in 2024, despite 1% tax

Honeywell itself has been focused on "high-return acquisitions that will drive future growth across its portfolio in alignment with the three powerful megatrends," according to the release. Those trends are automation, the future of aviation and energy transition.

The combined company is worth $132 billion and is a member of the Dow Jones Industrial Average.

Honeywell shares are down 3% so far this year as the Dow Jones Industrial Average has advanced 11%.

Honeywell stock edged up 2% in premarket trade.

Honeywell will become the latest member of the Dow Jones Industrial Average DJIA to conduct a spinoff. Johnson & Johnson (JNJ) spun off its Kenvue Inc. (KVUE) unit, which houses brands like Listerine and Neutrogena, in a deal that was completed just over a year ago. Dow Inc. (DOW) was known as DowDuPont Inc. before a 2019 split into three independent public companies.

See also: DuPont is latest industrial behemoth to split into multiple public companies

-Emily Bary

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10-08-24 0702ET

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