Carrier Global
is selling its Global Access Solutions business to
Honeywell International
for $4.95 billion, Carrier announced on Friday
Investors were pleased. Carrier CEO David Gitlin said this is only the beginning.
“We’re not only very pleased with the [sale] outcome, we’re pleased that it’s going to end up in the hands of Honeywell,” Gitlin told Barron’s.
The division has some 1,200 employees, which will become part of Honeywell’s commercial building technology businesses.
“It’s a good outcome for our people,” Gitlin said.
Carrier’s Global Access Solutions business provides tech to protect homes and businesses. It is a part of Carrier’s Fire and Security business segment, which accounted for about $3.6 billion in 2022 sales. In total for that year, Carrier generated about $20.4 billion in sales.
In afternoon trading, Carrier stock was up 4.1%, to $55.04. Honeywell shares were down 2%, to $193.92. The
S&P 500
and the Dow Jones Industrial Average were both up 0.4%.
The stock moves added about $1.8 billion to Carrier’s market capitalization and took about $1.8 billion from Honeywell’s.
Valuation is one reason. Carrier said the value represented by the $5 billion price tag is about 17 times estimated 2023 earnings before interest, taxes, depreciation, and amortization, or Ebitda.
Carrier trades for roughly 13 times estimated 2023 Ebitda, according to FactSet. Honeywell trades for about 15 times.
Honeywell paid a premium and expects to generate cost savings and synergies by slotting the business in its commercial building technology businesses.
Along with fetching a solid price, the move for Carrier makes the company more of a heating, ventilation, and air-conditioning, or HVAC, pure play.
More changes are coming. Carrier is also selling its fire suppression and refrigeration businesses.
“We have gotten our first round of bids back, [that] is progressing well,” Gitlin said. “For us, it’s all about strategic clarity.”
The CEO’s “North Star” in guiding the business is to become the global leader in intelligent climate and energy solutions. Carrier, essentially, wants to save homes and businesses money by offering, and servicing, connected, intelligent, and efficient heating and cooling solutions.
Carrier has been busy changing its business portfolio in pursuit of that goal. In April, Carrier announced plans to buy Viessmann Climate Solutions for about $13 billion. Carrier will use the proceeds from the Access sale to pay down debt taken to fund that deal.
Change can bring value for shareholders, but only if transitions are the subsequent transactions are managed effectively.
Gitlin worked at what was then United Technologies and helped to integrate the acquisitions of Goodrich and Rockwell Collins into United’s aerospace business. Carrier was spun out of United Technologies in 2020. United Technologies aerospace businesses are now part of
RTX.
Those acquisitions and integrations were successful, but there were mistakes and hiccups along the way.
It’s never easy, Gitlin said, but “In my experience, when you buy premier companies good things happen.” He considers Viessmann a premium company.
Culture is important in successful acquisitions, too.
“We avoid the concept of you versus us. Day one it becomes all about ‘we’ as one team,” said Gitlin, adding “When we look at [Veissmann] we feel like we’re looking in the mirror.”
Investors are optimistic about what’s going on a Carrier. Coming into Friday trading, Carrier stock was up about 22% over the past 12 months. Honeywell shares have fallen about 7% over the same span.
Barron’s wrote positively about Carrier shares shortly after the Viessmann acquisition. Since then, through midday trading Friday, Carrier shares were up about 30%. The S&P 500 was up about 10% over the same span.
Write to Al Root at [email protected]
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