Honeywell announced its plan to acquire the security division of air conditioner manufacturer Carrier (CARR.N) for $4.95 billion in cash. This move aims to strengthen Honeywell’s building safety business, which has recently experienced a slowdown in growth.
The acquisition marks the largest deal under Honeywell’s new CEO, Vimal Kapur, and will provide Honeywell with access to Carrier’s well-known brands, including electronic lock maker Onity and cloud-based lock manufacturer Supra. These brands are prominently used in major hotel chains.
Carrier’s Access Solutions security business specializes in offering security systems for residential, commercial, and industrial applications. Earlier this year, Reuters reported that Carrier was considering divesting its fire and security business.
Wolfe Research analyst Nigel Coe remarked, “Strategically, this is a hand-in-glove acquisition for Honeywell. It was the most logical buyer and so this is not a surprise, although the multiple is certainly much higher as already noted.”
Following the announcement, Carrier’s shares saw a 4.3% increase to $55.17 in early trading, whereas Honeywell experienced a slight decline of about 1.4%.
The acquisition is expected to bolster Honeywell’s building technologies segment, which has been grappling with sluggish revenue growth due to tepid demand. Despite this, Honeywell’s overall performance has been buoyed by strong results in its aviation division.
UBS analyst Chris Snyder expressed concerns, stating, “Our concern with the deal is that it appears Honeywell is paying a peak multiple on peak non-residential construction activity.”
The all-cash transaction is anticipated to be finalized before the end of the third quarter of 2024. Honeywell expects the deal to be cash-earnings per share accretive in the first full year following the acquisition.
Carrier plans to use the estimated net proceeds of approximately $4 billion from the sale to reduce its debt. The fire and security unit represented about 17% of Carrier’s total sales in the previous year.
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