Elliott’s $164bn corporate break-up target
Elliott’s biggest wager yet
Yesterday, some jaws were on the floor at Elliott Management’s London office after it was announced that the hedge fund’s golden boy of Europe, Nabeel Bhanji, was leaving for what the FT later reported was a top role at Citadel.
But the world’s leading activist firm has a penchant for being able to quickly change the conversation using its financial prowess and fearsome reputation.
Hours after DD unpacked Bhanji’s decampment to Ken Griffin’s hedge fund colossus, Elliott unveiled a massive corporate break-up push and the biggest single investment in the firm’s history.
The hedge fund, led by billionaire Paul Singer, has built a $5bn stake in industrial conglomerate Honeywell International and is pushing the $164bn company to break up into two businesses.
Armed with a 3 per cent stake, Elliott on Tuesday called for Honeywell to split its aerospace division, which supplies aircraft equipment, from its automation unit, which sells tools for warehouses and other plants.
The campaign follows a trend of other potential break-ups. Sometimes businesses are healthier — and more lucrative — as separate entities, as opposed to a hulking corporate giant.
This summer the FT broke the news that Warner Bros Discovery was drafting a plan to split its digital streaming and studio businesses from its legacy television networks. CVS Health also weighed a break-up before ousting its chief executive.
But a $5bn bet is a serious wager. Elliott manages $69bn in assets, and has this year embraced the approach of taking multibillion-dollar stakes, including a $2.5bn investment in chipmaker Texas Instruments and a $2bn stake in Southwest Airlines.
Part of Elliott’s playbook involves stealthily building a big stake before the target realises the activist has gotten a foothold.
Honeywell’s board and management “acknowledge and appreciate the perspectives of all our shareholders”, a spokesperson said. “Although Elliott had not made us aware of their views prior to today, we look forward to engaging with the firm to obtain their input.”
The North Carolina-based company is one of the last industrial conglomerates standing. Its American peers have shed businesses. Earlier this year, GE spun off its power and renewable energy unit, and 3M did the same to its healthcare division.
“The conglomerate structure that once suited Honeywell no longer does, and the time has come to embrace simplification,” Elliott’s Jesse Cohn and Marc Steinberg said in a letter.
Investors seem to agree — or at the very least think Elliott’s pressure might be for the best. The company’s shares rose about 4 per cent on Tuesday. The stock has lagged behind the wider market this year.