Honeywell and AlliedSignal Merge to Form Aerospace Powerhouse

Strategic Insights -

The merger between Honeywell and AlliedSignal marks a significant shift in the global engineering and electrical equipment industries. Under the leadership of Michael Bonsignore, Honeywell's chairman, the new conglomerate will boast a combined revenue of $23.5 billion, with ambitions to become a major player in acquisitions and compete with industry giants like General Electric and Tyco International. The merged company will adopt the Honeywell name and benefit from the acquisition of Honeywell's diverse range of businesses, including industrial and heating controls.

Key Takeaways:

  • The merger combines the revenues of Honeywell ($8.5 billion) and AlliedSignal ($15 billion) to create a global conglomerate with a market value of $49 billion.
  • The newly formed company will have a strong presence in the aerospace industry, accounting for 40% of its revenues, with a focus on manufacturing cockpit controls and handling aircraft service and maintenance.
  • The merger aims to achieve cost savings of $500 million by the end of 2002, primarily through the implementation of Allied Signal's quality control systems at Honeywell.
  • The combined company expects to achieve an earnings growth rate of 15-20% annually and a revenue growth rate of 8-10% to catch up with faster-growing rivals.
  • The merger marks a shift in Allied Signal's focus from being a consolidator to becoming a consolidator itself, with ambitions to acquire and integrate various businesses.
  • Nicholas Heymann, an analyst at Prudential Securities, predicts that the merged company will "define the standards in critical markets for the next 10 years."

Statistics:

  • The combined revenue of the merged company will be $23.5 billion.
  • The market value of the new conglomerate will be $49 billion.
  • The merger aims to achieve cost savings of $500 million by the end of 2002.
  • The product range of the merged company will be 25% industrial and heating control products.
  • The aerospace industry will account for 40% of the combined company's revenues.
  • The combined company expects to achieve an earnings growth rate of 15-20% annually.
  • The combined company expects to achieve a revenue growth rate of 8-10% annually.

Sources:

  • "Honeywell and Allied Signal to Merge" by the Financial Times Limited, 1999.
  • Prudential Securities,

"Honeywell and AlliedSignal Predict to Define Standards in Critical Markets for 10 Years"