Honeywell Aerospace May Be On an Acquisition Hunt

by Richard Pettibone, Aerospace & Defense Companies Analyst, Forecast International.

Thanks to nimble management, Honeywell has maintained a well-diversified portfolio that enables it to mitigate risks, and it has not shied away from refining its operations, acquiring some businesses and divesting others.

This past year the focus was on the cybersecurity acquisition of Nextnine, a privately held provider of security management solutions and technologies for industrial customers.  Cybersecurity is a booming market, with forecasts of growth to some $170 billion by 2020.  Honeywell is looking to incorporate such offerings as part of its Connected Plant solutions for industry.

In its 26th annual Global Business Aviation Outlook (released 10/17), Honeywell is forecasting up to 8,300 new business jet deliveries worth $249 billion from 2017 to 2027, representing a 2 to 3 percent reduction from the values noted in the 2016 forecast.  The company is anticipating a return to growth in the 2018-19 timeframe of about 2 percent.  Regardless, Honeywell is seeing a steady aftermarket workflow as operators keep their older aircraft in service.

With consolidation of Tier I suppliers, such as UTC Aerospace Systems and Rockwell Collins, picking up pace, Honeywell is likely mulling options for its aerospace unit.  Previously, Honeywell made its own play for United Technologies in a $91 billion hostile takeover that failed. Now with competition increasing and primes such as Boeing forming their own avionics operations, Honeywell aerospace may be looking to expand or divest.

One scenario could see a merger with GE Aviation to counter the pending UTC/Rockwell Collins combination. Another long shot could see Boeing acquiring the operation as the basis of its avionics expansion strategy.

For the moment, Honeywell is likely going to be the hunter, as management believes its current portfolio – following the spin-off of its Homes product portfolio and ADI global distribution business – is well positioned.  Further, cash from the spin-off will give the company even more options to fund its merger and acquisition strategy.

The Defense & Aerospace Companies series focuses on worldwide aerospace and defense prime contractors and subcontractors. Concise reports provide data on individual corporations regarding recent mergers, restructurings, and joint ventures, along with a Strategic Outlook that examines the company’s strengths, weaknesses, and opportunities. Also included in each report are financial and industrial segment data and snapshot coverage of major aerospace and defense programs.

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