Elliott Investment Management LP sent a letter to Honeywell International Inc.’s board of directors on Nov. 12 calling for a simplification of the company’s conglomerate structure. 

Elliott is Honeywell’s largest active investor, having invested $5 billion in the company to date.

The letter suggested that Honeywell split into two separate entities—Honeywell Aerospace and Honeywell Automation.

“Over the last five years, uneven execution, inconsistent financial results and an underperforming share price have diminished [Honeywell’s] strong record of value creation,” the letter said. 

Honeywell’s conglomerate structure no longer suits the company, Elliott’s letter argued. Honeywell has 12 different public reporting lines that could each operate as “a sizeable standalone company.”

Honeywell maintains more than 700 different sites across 80 different countries and employs over 100,000 employees.

“The breadth of the portfolio, coupled with the depth of expertise required to remain a leader in each of these industries, results in a company that is unwieldy for all parties—from management to investors,” the letter said.

Honeywell Aerospace and Honeywell Automation would benefit from simplified strategies, focused management, better capital allocation and improved operational performance, it said.

Separating Honeywell into two “could result in a share price upside of 51[%]-75% over the next two years,” as the investment landscape changes and investors diversify on their own, the letter said.

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