Honeywell International Inc. (HON:US) is evaluating about 100 companies as potential acquisition targets, with a focus on deals of less than $1 billion because they are easier to assimilate, Chief Executive Officer Dave Cote said.
While the prospects are valued at as much as $20 billion, Honeywell is unlikely to buy anything that big because it would risk integration challenges and paying too much, Cote said yesterday in an interview at Bloomberg’s headquarters office in New York.
“Stuff over $1 billion, then I start to get queasy,” said Cote, 60. “I like to acquire (HON:US) at a size that we can immediately Honeywell-ize it.”
Since becoming CEO in 2002, Cote has acquired about 75 companies for $10 billion and sold $6 billion of unwanted businesses at Honeywell, whose products include thermostats and aircraft cockpit controls. Having a large pool of potential takeover targets gives the Morris Township, New Jersey-based company the discipline to walk away from deals, he said.
Honeywell rose 0.2 percent to $70.53 at 4:02 p.m. in New York. The shares have gained 11 percent this year, outpacing (HON:US) a 6.4 percent increase by the Standard & Poor’s 500 Index.
Flawed deal-making, including the merger of Honeywell with Allied Signal Inc. in 1999 and the purchase of Pittway Corp. in 2000, led to company infighting, Cote said. Honeywell had large writedowns a decade ago.
“Investors when I first got there used to say, ‘Are you going to blow the money?’” Cote said. “We’ve gotten to the point where they say, ‘Geez, you guys are good at capital deployment and we trust the acquisitions that you do.’”
Honeywell in October completed the purchase of a 70 percent stake in Thomas Russell Co., a seller of natural gas processing equipment, for $525 million and announced in December it will pay about $600 million for Intermec Inc., a maker of handheld devices used in warehousing and field service.
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