Just before the start of last weekend, another mega-deal went through the ticker. In a press release, US conglomerate Honeywell International announced that it will acquire the security division of fellow US-based device manufacturer Carrier Global Corporation for a cash payment of $4.95 billion.

The security division of Carrier Global is known as Global Access Solutions and produces electronic key systems for large companies, hotels, and hospital chains. Before I go into further details of the mega-deal, I would like to briefly introduce you to both companies.

Honeywell and Carrier Global in focus Honeywell International Inc., founded in 1885 and based in Charlotte, North Carolina (640 km southwest of Washington DC), is a conglomerate active in automation and control technology, aviation, and specialty chemicals.

The US-based company has around 97,000 employees worldwide. It generates around 60% of its revenue in the US, 19.3% in Europe, and the rest in other countries around the world. In the 2022 financial year, Honeywell achieved a turnover of $35.5 billion. The operating profit (EBIT) was $6.4 billion.

Carrier Global Corporation, according to its own statements, is the world market leader in intelligent climate and energy solutions. Carrier produces and distributes heating, ventilation, and air-conditioning systems, cooling and fire protection equipment, and security systems.

The company, founded in 1915, has its headquarters in Palm Beach Gardens, Florida, about 130 km north of Miami. Carrier’s 52,000 employees achieved a turnover of $20.4 billion in the 2022 financial year. The operating profit (EBIT) was $2.4 billion.

Security Division Global Access Solutions The subject of the deal is Carrier’s security division, Global Access Solutions. With around 1,200 employees in 33 countries, this business segment is an innovative, world-leading provider of access and security solutions, electronic locking systems, and contactless mobile key solutions.

Carrier expects to generate net proceeds of approximately $4 billion from the transaction and intends to use the proceeds to reduce debt.

Honeywell intends to strengthen its building automation business by acquiring Global Access Solutions and become a leading provider of security solutions, as Honeywell CEO Vimal Kapur emphasizes in a statement on the acquisition:

“Honeywell’s strong track record of providing products and services for building automation makes this acquisition a logical addition that will create a leading security platform with an estimated annual revenue of over $1 billion.”

According to Honeywell, the purchase price is equivalent to around 13 times the expected EBITDA for 2023, including tax benefits and ongoing cost synergies. It is expected that the transaction will have a positive effect on cash per share (cash-EPS) in the first full year of ownership.

How the markets reacted Investors reacted very differently to the announcement of the deal on December 8, 2023. The share price of Carrier Global on the New York Stock Exchange NYSE rose a whopping 4.5% on that day. Investors obviously believe that Carrier Global has received a good price for its security division.

It was very different with the Honeywell papers. The share price fell by -1.6% to $194.61 on the US technology exchange Nasdaq. The investors are apparently unhappy with the amount paid by Honeywell.

Where to go from here According to Honeywell’s estimates, the transaction should be completed by the end of the 3rd quarter of 2024. Before that, the usual closing conditions must be met and the necessary regulatory approvals obtained.