Honeywell’s W. Covina Unit Among 4 on Block
Honeywell said Wednesday that it plans to sell four units of its space and aviation systems business, including the Training and Control Systems division it started in West Covina in 1956.
The Minneapolis firm said it has put the four divisions--all military suppliers--up for sale to focus on three core businesses: commercial aviation, military avionics and space markets. Industry analysts estimated that the units could sell for as much as $500 million.
“This decision will allow us to concentrate on areas where we have significant market shares and will reduce our exposure in military markets where our competitive advantage isn’t strong,” James J. Renier, Honeywell president and chief executive, said in a statement.
In addition to the West Covina operation, Honeywell is looking for a buyer for its Electro-Optics division in Lexington, Mass; Defense Communications and Production division in Tampa, Fla., and Signal Analysis Center in Annapolis, Md.
The Training and Control Systems division employs more than 1,000--637 in West Covina, 58 in San Diego, 50 in Minneapolis and 290 in Herndon, Va.--to produce maintenance trainers and computer-based flight simulators for the B-22, F-18 and T-45 Navy aircraft. A Honeywell spokesman in Minneapolis said “no job actions or staff reductions are planned.”
The four divisions, which employ a total of 3,500 workers, had combined 1987 sales of $430 million, or about 6% of Honeywell’s total sales of $6.7 billion.
“What triggered this was a strategic review of their businesses this summer,” explained George J. Podrasky Jr., an aerospace analyst at Duff & Phelps in Chicago. “The strategic review was in the context of declining defense budgets. They were looking at what businesses they wanted to be in, and these four didn’t cross the hurdles for growth or profit potential and market share or technology dominance.”
“I see it as a sensible move,” said Donald Young at the Sanford C. Bernstein & Co. investment firm, who added that the four divisions could fetch as much as $500 million.
Podrasky noted, however, that Honeywell is nevertheless maintaining a strong position in the military business. Its defense and marine division, which supplies torpedoes and ammunition to the military and had $1.2 billion in 1987 sales, won’t be affected by the sale.
Last year, 30% of Honeywell’s total sales were to the U.S. government, according to Podrasky. If the four units were eliminated, that would drop to 25%, he noted.
Proceeds from the sale of the four units will be used to reduce debt, invest in the company’s other businesses or repurchase stock.
On the New York Stock Exchange, Honeywell shares closed Wednesday at $58.75, down 50 cents from Tuesday.