Honeywell Strikes $5 Billion Deal
Industrial conglomerate Honeywell International has agreed to purchase the Global Access Solutions business of HVAC systems manufacturer Carrier Global in an all-stock deal valued at $4.95 billion. The acquisition, announced early Friday, will significantly expand Honeywell’s building technologies portfolio.
Strategic Fit for Portfolio Realignment
For Honeywell, the purchase is a “natural fit” that supports the company’s previously announced plans to realign operations into three core divisions – building technologies, aerospace, and performance materials and technologies.
The Global Access Solutions unit provides security services, electronic locking mechanisms, and contactless entry systems for commercial buildings, hospitals, hotel chains and more. Adding these hardware and software security solutions to Honeywell’s existing building automation business will create a more comprehensive smart buildings platform capable of generating over $1 billion in annual revenue.
The deal is also expected to be cash-earnings-per-share accretive in the first full year after closing, which Honeywell CEO Vimal Kapur highlighted in his statement on the acquisition.
Carrier Advancing Higher-Growth Strategy
For Carrier Global, the sale of the access solutions business for around $4 billion in net proceeds allows the company to streamline operations and focus more narrowly on its core HVAC and refrigeration products.
Proceeds from the divestiture will go toward paying down Carrier’s debt as it executes a wider repositioning strategy concentrated on higher-growth segments like intelligent building solutions. Earlier in 2022, Carrier announced plans to spin off or sell its Chubb fire and security as well as commercial refrigeration units for similar strategic reasons.
The Global Access Solutions deal comes during a strong run for Carrier stock, up over 28% year-to-date through Thursday. Shares surged another 5.5% Friday morning on news of the transaction, putting the price in position to clear resistance around $54 and challenge August’s all-time high near $60.
Closing Timeline and Conditions
Honeywell and Carrier expect regulatory approvals and other closing conditions to be met for the acquisition to finalize before the third quarter of 2024. The $4.95 billion transaction cost will be paid entirely through newly issued Honeywell stock.
While Honeywell shares dipped 0.5% on the announcement, the industrial leader remains in an upward trend overall in 2023 despite a nearly 8% year-to-date decline through Thursday. After bottoming below $200 in October, the stock has regained key levels and is working up the right side of a new base.
Portfolio Realignments Reflect Broader Industry Shifts
The refocusing efforts at both companies mirror wider changes sweeping the industrials sector. Trends like Internet of Things connectivity, electrification, increased automation and machine learning are pushing organizations to hone their business mixes.
Honeywell’s realignment around building technologies, aerospace, and performance materials plays directly into growth areas like smarter infrastructure and sustainable aviation. Meanwhile, Carrier’s intensified prioritization of its core HVAC and refrigeration operations follows surging climate tech demand.
By divesting the Global Access Solutions business to Honeywell, Carrier can redirect more capital and attention to its fastest-expanding units while still realizing strong value for the access control arm. The $5 billion valuation and additional financial flexibility will support Carrier’s wider growth objectives.
Conclusion
Honeywell’s $4.95 billion all-stock agreement to buy Carrier Global’s Global Access Solutions division bolsters Honeywell’s building technologies segment while allowing Carrier to focus more narrowly on higher-growth HVAC and refrigeration products. The deal is strategically aligned with both companies’ portfolio realignment efforts targeting smarter buildings, increased automation and other rapidly evolving industry trends. If approvals and closing conditions are met on schedule, the acquisition should close by Q3 2024.
