Two-Stage Break-Up, Let's Take a Look at GTX
On October 1, global leader in the turbocharger technology space, Garrett Motion, Inc. (GTX), will be Spun off from industrial giant, Honeywell International, Inc. (HON) in what will be the first of two Spinoffs to take place before the close of 2018. While this analysis focuses mainly on the first transaction (GTX), we will be releasing another update capturing the second Spinoff of Resideo Technologies, Inc. (REZI), HON’s Homes and ADI Global Distribution business.The Edge View...
Out of the two Spinoffs lined up, the industrial giant Honeywell International, Inc. (HON, Parent) will first be Spinning off its high-growth business Garrett Motion, Inc. (GTX) into a new independent publicly traded company on October 1, 2018.
The current split follows the successful tax-free Spinoff of its Resins and Chemicals business, AdvanSix, Inc. (ASIX) in October 2016 – a leading manufacturer of Nylon 6. Here, HON holders received 1 share of ASIX for every 25 shares held in HON. Since its split, ASIX significantly outperformed the market and generated a massive return of +151.2% compared to the S&P SmallCap 600 Index return of +21.8% in the initial year from the Spinoff. We believe these two upcoming Spinoffs will have the ability to follow ASIX’s example, as GTX will position itself as a market leader with a 25% share in the $12bn global turbocharger business, like ASIX’s post-Spin market-leading position in its own space.
Longer-Term Hold in HON (post-Spin): After both Garrett and Resideo are Spun off to the market, similar to its previous Spinoff of AdvanSix (ASIX) in October 2016, we don’t believe this is the end of the story for HON. We believe that there are other break-ups that can be created in order to continue to eliminate its conglomerate discount such as HON's Safety & Productivity Solutions (SPS) and Performance Materials and Technology (PMT) segments that can also create value.
Honeywell International is a technology and manufacturing company. The company has four segments: Aerospace, which supplies products, software and services for aircrafts; Honeywell Building Technologies, which provides products, software, solutions and technologies including building control and optimization, energy management, access control, video surveillance, fire products, and remote patient monitoring systems; Performance Materials and Technologies, which develops and manufactures chemicals and materials, process technologies and automation solutions; and Safety and Productivity Solutions, which provides products and software that improve productivity, workplace safety and asset performance.
The Edge Group - Global Fundamental Catalyst Investing. The Edge provides investors with access to hidden corporate value from Global Special Situations using a pioneering approach to investments. Founded in 2005 by fund management and investment banking professionals to provide high quality, private equity-level research on Global Corporate Divestitures for the benefit of fundamental event-driven, growth and value-oriented investors in this difficult to track, but proven investment space.
The Edge will look to screen and analyze include Spinoffs; Reverse Morris Trusts; Squeeze Outs; Privatizations; Demutualization; Deep Discounted; Rights Issues; Rights Offering; Restructuring; Insider Purchases / Buying Change of Management / CEO Change; Deteriorating fundamentals; Post-Bankruptcy; Reorganization; Tender Offer; M&A Deals; Secondary Offering; Share Swap; Thrift Conversions; Share Buybacks; Activist; Mergers. All analyzed from a fundamental point of view.
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