HONEYWELL TO ACQUIRE CAES TO ENHANCE DEFENSE TECHNOLOGIES ACROSS LAND, SEA, AIR AND SPACE
Honeywell (Nasdaq: HON) announced its plan to acquire CAES Systems Holdings from Advent International for $1.9 billion in cash.
The acquisition will bolster Honeywell's defense technologies across multiple domains, including land, sea, air, and space.
CAES' high-reliability radio frequency (RF) technologies are expected to drive long-term growth and diversify revenue streams for Honeywell.
The deal values CAES at approximately 14x its estimated 2024 EBITDA, adjusted for tax.
This acquisition will add about 2,200 employees and advanced engineering talent to Honeywell.
Combined capabilities will enhance Honeywell's position in defense technologies such as electromagnetic defense, radar, and sensing.
The deal is anticipated to close in the second half of 2024, subject to customary closing conditions and regulatory approvals.
- Honeywell will acquire CAES for $1.9 billion in cash.
- CAES' technologies will drive long-term growth and diversify revenue streams.
- The acquisition is expected to be accretive to adjusted earnings per share in the first full year.
- Honeywell's position in defense technologies, including RF, radar, and sensing, will be strengthened.
- The acquisition adds approximately 2,200 employees and advanced engineering talent.
- CAES' established U.S. military platforms create significant international growth opportunities.
- The acquisition involves a large cash outlay of $1.9 billion.
- Integration risks may arise from merging CAES’ operations with Honeywell.
- Regulatory approvals are required for the acquisition to close, which could cause delays.
Insights
The acquisition of CAES by Honeywell for approximately
Honeywell's acquisition of CAES underscores its commitment to enhancing defense capabilities across various platforms. CAES' established presence in key U.S. military platforms and advanced RF technologies offer significant growth opportunities, especially with emerging needs in electromagnetic defense and radar systems. This move not only strengthens Honeywell's existing defense portfolio but also positions the company favorably for future defense contracts. The addition of highly skilled engineers and automated facilities will likely expedite innovation and improve operational efficiencies. For retail investors, this acquisition should be seen as a strategic alignment with broader defense industry trends, reflecting Honeywell's proactive approach to maintaining a competitive edge.
The acquisition of CAES by Honeywell is a calculated step to expand its market footprint in the defense sector, particularly in RF and radar technologies. CAES' capabilities in these areas dovetail with Honeywell's existing aerospace and defense offerings, potentially unlocking new markets and customer segments. The expected growth in demand for these technologies bodes well for Honeywell's revenue streams. However, the success of this acquisition will hinge on effective integration and the ability to leverage CAES' technologies to secure new defense contracts. Retail investors should consider the potential for both immediate and long-term benefits from this strategic acquisition, while remaining mindful of integration risks.
- CAES' high-reliability radio frequency technologies will help drive long-term growth and further diversify revenue streams on leading defense platforms
- Additional highly skilled engineers and automated facilities will deepen Honeywell's aerospace expertise and operations, strengthen offerings for customers
- CAES' established positions across leading
U.S. military platforms provide significant opportunities for international growth
This acquisition will enhance Honeywell's defense technology solutions across land, sea, air and space, including new electromagnetic defense solutions for end-to-end radio frequency (RF) signal management. With CAES' scalable offerings and Honeywell's current defense and space portfolio, the combined company will grow Honeywell's established production and upgrade positions on critical platforms that include F-35, EA-18G, AMRAAM and GMLRS, while also introducing offerings on new platforms like Navy Radar (SPY-6) and UAS and C-UAS technologies. Based on current and anticipated demand, these programs are expected to grow significantly in the years to come, creating a favorable tailwind for revenue growth of Honeywell's Aerospace Technologies business.
"This acquisition further positions Honeywell at the forefront of the defense industry's most dynamic sectors and sets the tempo for continued growth across our aerospace business," said Vimal Kapur, Chairman and CEO of Honeywell. "With the integration of CAES' solutions and capabilities, we will fortify our existing defense offerings, while also expanding our capabilities in pivotal areas like RF, radar and sensing technologies, to ensure a market-leading position in areas that are critical for global security."
Headquartered in
"The combination of our talented teams will diversify and deepen our expertise and specialized capabilities that enable us to scale current offerings and innovate new ones across critical military platforms," said Honeywell Aerospace Technologies President and CEO Jim Currier. "CAES' trusted position with top
Looking ahead, Honeywell sees attractive opportunities to expand the combined solutions internationally, capitalizing on accretive growth spaces with select defense customers.
"As a trusted supplier and mission partner to our customers across advanced RF capabilities, I couldn't be more excited to see CAES join the Honeywell team and work together to build on the outstanding expertise of both companies," said Mike Kahn, President and CEO of CAES. "Our extraordinary talent, RF breadth and world-class manufacturing facilities will offer new opportunities and further drive innovation for our industry."
"This transaction marks a significant milestone for both parties, and we are confident that the business will continue to thrive and grow," said Shonnel Malani, Managing Partner at Advent International. "Under Advent International's ownership, we have invested significantly in R&D, capital and capability enhancement, all of which has been pursued to drive growth and the development of cutting-edge capabilities. We believe this sale to a strong strategic home will secure its long-term future."
This is the third acquisition Honeywell announced this year as part of its disciplined capital deployment strategy. The company is focused on high-return acquisitions that will drive future growth across its portfolio, which is aligned with the three compelling megatrends of automation, the future of aviation and energy transition.
The CAES transaction, which is expected to be adjusted earnings per share1 accretive in the first full year of ownership, is not subject to any financing conditions and is expected to close in the second half of 2024, subject to customary closing conditions, including receipt of certain regulatory approvals.
About Honeywell
Honeywell is an integrated operating company serving a broad range of industries and geographies around the world. Our business is aligned with three powerful megatrends – automation, the future of aviation and energy transition – underpinned by our Honeywell Accelerator operating system and Honeywell Forge IoT platform. As a trusted partner, we help organizations solve the world's toughest, most complex challenges, providing actionable solutions and innovations through our Aerospace Technologies, Industrial Automation, Building Automation and Energy and Sustainability Solutions business segments that help make the world smarter, safer and more sustainable. For more news and information on Honeywell, please visit www.honeywell.com/newsroom.
We describe many of the trends and other factors that drive our business and future results in this release. Such discussions contain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). Forward-looking statements are those that address activities, events, or developments that management intends, expects, projects, believes, or anticipates will or may occur in the future. They are based on management's assumptions and assessments in light of past experience and trends, current economic and industry conditions, expected future developments, and other relevant factors, many of which are difficult to predict and outside of our control. They are not guarantees of future performance, and actual results, developments and business decisions may differ significantly from those envisaged by our forward-looking statements. We do not undertake to update or revise any of our forward-looking statements, except as required by applicable securities law. Our forward-looking statements are also subject to material risks and uncertainties, including ongoing macroeconomic and geopolitical risks, such as lower GDP growth or recession, capital markets volatility, inflation, and certain regional conflicts, that can affect our performance in both the near- and long-term. In addition, no assurance can be given that any plan, initiative, projection, goal, commitment, expectation, or prospect set forth in this release can or will be achieved. These forward-looking statements should be considered in light of the information included in this release, our Form 10-K and other filings with the Securities and Exchange Commission. Any forward-looking plans described herein are not final and may be modified or abandoned at any time.
1 This release references certain non-GAAP measures, including:
- Adjusted earnings per share, which is defined as diluted earnings per share adjusted to exclude pension mark-to-market expense, amortization of acquisition-related intangibles, acquisition-related costs, and other items as described in reconciliations provided when we disclose adjusted earnings per share; and
- EBITDA, which we define as earnings before tax, depreciation and amortization.
Management believes that, when considered together with reported amounts, these measures are useful to investors and management in understanding our ongoing operations and in the analysis of ongoing operating trends.
Management does not consider these non-GAAP measures in isolation or as an alternative to financial measures determined in accordance with GAAP. The principal limitations of these non-GAAP financial measures are that they exclude significant expenses and income that are required by GAAP to be recognized in the consolidated financial statements. In addition, they are subject to inherent limitations as they reflect the exercise of judgments by management about which expenses and income are excluded or included in determining these non-GAAP financial measures.
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