Honeywell International Inc. is looking at acquisitions larger than the $5.1 billion it paid for Elster as it makes headway on a program that targets deals spending of about twice that much by 2019.
“We’ve got a pipeline that’s got plenty of opportunities of that size or bigger,” said Chief Financial Officer Tom Szlosek, referring to the purchase of Elster, a maker of gas, electric and water meters.
Chief Executive Officer Dave Cote has made more than 80 acquisitions in the 13 years he’s led the company as he seeks to build and refine Honeywell’s stable of brands and products ranging from jet engines and aircraft guidance systems to rubber boots. In March 2014, Cote pledged to spend $10 billion or more on acquisitions over the next five years, double the previous half-decade period. He also changed his mind after saying in 2013 that acquisitions of more than $1 billion made him “queasy.”
“I’m expecting that you’ll all start to see the fruits of the labor that we’ve been putting in for the better part of 18 months as we built out this new M&A team to start seeing some further deals being announced,” Szlosek said in an interview after the company announced third-quarter earnings.
Honeywell won’t wait around to integrate Elster before it hunts for more deals, Szlosek said. Although a large acquisition isn’t imminent, he said the market may “start seeing some further deals being announced.”
Before snagging Elster in July, analysts began clamoring for Honeywell to put its cash to use, such as buying back more stock, as its acquisition hunt seemed stalled. The ability to buy companies will drive Honeywell’s earnings, said Steve Tusa, an analyst with JPMorgan Chase & Co., in an Oct. 9 report.
“We view the Elster acquisition as the first step in Honeywell unleashing its balance sheet potential, which we peg at about $10 billion post acquisition,” Tusa said in the report.
Adding companies would help Honeywell increase revenue in a global economy that has posted sluggish growth. The company expects a sales drop of 4 percent this year because of the strong dollar and slack oil and gas industry investment.
“Each of the businesses would love to jump in and do some deals,” Szlosek said of the company’s three operating units. “We’re very far along on a number of them.”