Honeywell Tells Plans for Major Restructuring

Honeywell Inc., the subject of intense takeover speculation for the past two weeks, today announced a major restructuring program that includes reducing its weapons business and cutting 4,000 jobs.

The company said it also planned to repurchase up to 10 million shares of its common stock on the open market and to sell a “substantial portion” of its 50% stake in Yamatake-Honeywell, a Japanese controls maker. Analysts have valued that holding at nearly $1 billion.

The sweeping program will result in a 65-cent increase in Honeywell’s annual dividend, to $2.75 a share, and could include a special cash dividend, said Chairman James J. Renier.

Renier said he expects the restructuring to improve operating profits by about $150 million over the next 18 months.

Honeywell is the leading manufacturer of torpedoes for the U.S. Navy and also supplies small, medium and large ammunition to the U.S. Army, Kathy Tunheim, a company spokeswoman, said.

Wall Street greeted today’s announcement with open arms. Honeywell jumped $3.37 1/2 to $88.87 1/2 in active late-morning trading on the New York Stock Exchange, following a delayed opening.

Part of 1988 Strategy

Renier said the reduction of Honeywell’s weapons business is part of a strategy begun in 1988 to “concentrate on core controls businesses that principally serve commercial markets as well as the market for military and space controls.”

The reduction will “proceed over time in a responsible manner that recognizes the U.S. government’s interest in these businesses so as not to adversely affect national security interests, our government program obligations or the value of these businesses to Honeywell shareholders,” Renier said.

The weapons business accounts for about 20% of Honeywell’s revenue.

Spokeswoman Tunheim would not say whether a sale of the business is one of the options being considered.

However, Tunheim said negotiations to sell the company’s stake in Yamatake-Honeywell, which is listed on the Tokyo Stock Exchange, will begin within a few days. She would not identify potential buyers. Japanese investors currently own half of the company, she said.

Honeywell’s restructuring program will include the elimination of 4,000 jobs worldwide over the next 18 months, including 300 corporate staff positions targeted in a previous announcement.

Honeywell currently employs about 78,000 workers. Many of the job cuts will be made through attrition, but layoffs will be necessary.