Honeywell International Inc. has announced a major strategic shift, revealing plans to spin off its Advanced Materials business into a new, independent company. The separation, expected to be completed by late 2025 or early 2026, aims to create two more focused entities. This move will allow the new company to concentrate on sustainable specialty chemicals, while Honeywell sharpens its focus on automation, aviation, and the energy transition.
A Strategic Shift towards Core Megatrends
Honeywell’s decision is part of a larger strategy to simplify its business and align with what it identifies as three key global megatrends. By divesting the Advanced Materials unit, the company can dedicate more resources and attention to its core priorities.
According to CEO Vimal Kapur, this realignment will help streamline operations and reduce portfolio complexity. Honeywell will now focus its innovation and growth efforts on automation, the future of aviation, and the ongoing energy transition. This move is designed to accelerate organic growth by concentrating on high-demand sectors where Honeywell has a strong competitive advantage.
This focused approach is supported by the company’s Accelerator operating system, which will now be better positioned to drive advancements in these three key areas. The spin-off is consistent with Honeywell’s recent portfolio adjustments, which include both acquisitions and divestitures to strengthen its market position.
The New Advanced Materials Company at a Glance
Once independent, the Advanced Materials business will operate as a “pure play” company focused on sustainability-oriented specialty chemicals and materials. This clear identity is expected to attract investors specifically interested in environmental, social, and governance (ESG) criteria. The company will serve a variety of industries, including electronics, healthcare packaging, and industrial fibers.
The new entity is projected to be financially robust from the start. Below are its key projected metrics for fiscal year 2024.
| Metric | Projected Figure |
|---|---|
| Annual Revenue | $3.7 billion to $3.9 billion |
| EBITDA Margin | Above 25% |
This financial strength will provide the new company with the flexibility to pursue its own growth and innovation strategies. Key benefits of operating as a standalone business include:
- Sharper Strategic Focus: The ability to concentrate exclusively on developing sustainable specialty chemicals and materials.
- Greater Financial Flexibility: Enhanced capacity to fund organic growth and innovative research projects.
- Custom Capital Allocation: Freedom to tailor investment strategies to maximize value within its specific market.
Financial Implications and Capital Deployment
This strategic separation is designed to be financially beneficial for both companies. By becoming independent, the Advanced Materials business will no longer be constrained by Honeywell’s broader capital structure. This will allow it to optimize its own cash flows and invest in high-return opportunities tailored to the chemicals market.
Meanwhile, Honeywell continues its disciplined approach to capital deployment. In 2024 alone, Honeywell has invested nearly $9 billion in four strategic acquisitions to bolster its core segments. These acquisitions include Carrier Access Solutions, Civitanavi, CAES, and Air Products’ LNG business.
This activity is part of a larger plan to deploy $25 billion in capital by 2025 through a combination of acquisitions, dividends, and share buybacks, all while strengthening its primary business areas.
The Road Ahead: Timeline and Process
The spin-off is expected to be finalized by the end of 2025 or in early 2026. The process is subject to standard regulatory procedures, including a Form 10 registration filing with the U.S. Securities and Exchange Commission, and requires final approval from Honeywell’s board of directors.
Importantly, the transaction does not require a shareholder vote. Honeywell intends to structure the spin-off as a tax-free distribution of shares to its existing shareholders. This means that investors will receive shares in the new Advanced Materials company without incurring an immediate tax liability, ensuring a smooth transition for all stakeholders. During the transition period, Honeywell will work to establish full operational independence for the new entity.
