Breakingviews: Honeywell Puts Dan Loeb In His Place

Honeywell (NYSE:HON) has put Dan Loeb in his place. The $110 billion conglomerate on Tuesday said it has decided to spin off two small, low-margin risky businesses rather than the aerospace unit the activist investor had targeted. It's a smarter way for new Chief Executive Darius Adamczyk to improve returns without much pain, especially on top of the better margins he's already producing.

Loeb argued that carving out aerospace, which produces almost 40 percent of Honeywell's revenue and a greater chunk of its profit, could generate $20 billion of shareholder value. Yet his argument relied on that unit being valued in line with peers that have higher margins or are growing faster.

The fact the aerospace provides most of the cash the company needs for dividends and buybacks made Honeywell cool to the argument. So did the chance that dismembering the conglomerate might create lots of additional costs. Honeywell also reckons the investment made over the past several years is about to bear fruit, so wants to be the one to harvest it.


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