Allied Signal and Honeywell to Merge, Creating $25 Billion Technology Company
Combined Company to be Called Honeywell
AlliedSignal Inc. and Honeywell Inc. announced today that they have signed a definitive merger agreement that will create a global technology company with revenues of $25 billion and technical and product leadership across a wide range of industries. The all-stock merger is expected to be immediately accretive to earnings per share, with an estimated EPS benefit of $0.17 in 2000, rising to $0.32 in 2002.
AlliedSignal Inc. is a $15 billion advanced technology and manufacturing company serving customers worldwide with aerospace and automotive products, specialty chemicals, performance fibers, plastics and advanced materials. It is one of 30 stocks that make up the Dow Jones Industrial Average. Honeywell is a leading provider of control technologies for buildings, homes, industry, space and aviation. The company has operations in 95 countries and had 1998 sales of $8.4 billion.
According to a prepared statement released by the companies, the merger combines two global players to create a Fortune 50 company that brings together deep management talent and diverse, successful, and complementary businesses. With a combined market capitalization in excess of $45 billion, the new company will have the financial strength, technology leadership, customer focus and Six Sigma process discipline to accelerate future growth across its businesses. The combined company will be called Honeywell and will be headquartered in Morristown, NJ.
Lawrence A. Bossidy, 64, chairman and CEO of AlliedSignal, will be the new company's chairman and, until his retirement on April 1, 2000, will focus on integrating the two companies. Michael R. Bonsignore, 58, chairman and CEO of Honeywell, will be the new company's CEO. The board of directors of the new company will be comprised of nine members from the current AlliedSignal Board and six members from the current Honeywell board. Upon Bossidy's retirement, Bonsignore will become chairman.
Reporting to Bonsignore will be two chief operating officers: Robert D. Johnson, currently president and CEO of AlliedSignal's Aerospace organization; and Giannantonio Ferrari, currently Honeywell's president and chief operating officer. Johnson will have responsibility for the combined aerospace operations headquartered in Phoenix, AZ, which will be the new company's largest single segment with approximately $10 billion in annual revenues. Ferrari will have responsibility for all of the other businesses of the combined company, which have total revenues of approximately $15 billion: industrial controls, home and building controls, turbochargers and other transportation products, specialty chemicals, and performance polymers.
Key staff appointments include Peter M. Kreindler (AlliedSignal), Law; James T. Porter (Honeywell), Information and Business Services; Donald J. Redlinger (AlliedSignal), Human Resources and Communications; Richard F. Wallman (AlliedSignal), Finance and Planning; Kris Burhardt (Honeywell), Technology; and Ray Stark (AlliedSignal), Quality.
A joint integration team has already been established to drive rapid planning and execution of the integration of the two companies. Stark, currently AlliedSignal's VP of Six Sigma and Productivity, and Bill Hjerpe, currently President of Honeywell Europe, will lead the integration team, which will report to an Executive Office including Bossidy, Bonsignore and the chief operating officers. The integration is expected to be completed prior to Bossidy's retirement on April 1, 2000.
The new company's Aerospace organization will combine Honeywell's strengths in sophisticated avionics with AlliedSignal's strengths in flight-safety products and systems to create a preeminent global provider of integrated solutions for all classes of aircraft. These broader customer channels, combined with AlliedSignal's strong aerospace aftermarket presence, will significantly increase the scope of the new company's aerospace businesses and position them for accelerated growth.
"The merger is an exciting natural fit of two companies whose businesses and cultures are highly complementary," Bossidy says. "The merger will ideally position the combined entity for enhanced revenue and income growth."
Honeywell's Bonsignore agrees. "Together we are creating a global corporation with vast potential and the strong balance sheet, management depth, technology leadership, vision and discipline to reach ambitious financial goals. These goals include annual EPS growth in excess of 15%, revenue growth of 8% to 10%, and free cash flow exceeding two billion dollars by 2002. We will be well positioned to augment strong organic growth with strategic acquisitions," he says.
The companies expect to achieve annual cost savings of approximately $500 million by rationalizing overhead costs, accelerating Six Sigma implementation, integrating research & development, and achieving procurement efficiencies. These savings are expected to begin immediately upon closing and to be fully realized by 2002.
The combined company will have a work force of more than 120,000 employees after the integration is complete, reflecting the elimination of approximately 2,000 jobs within the first six months after closing and approximately 2,500 additional job reductions in the following year. Although Honeywell's Minneapolis headquarters offices will be closed, the new company will continue to have over 6,000 employees in the Twin Cities area and its commitments to the local community, including philanthropic programs, will be unaffected.
The merger, which has been unanimously approved by the boards of both companies, is subject to approval by shareholders, regulatory authorities and customary closing conditions.