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Carrier Global Corp.’s stock was up by 5.4% in premarket trading on Friday after it confirmed plans to sell its 1,200-employee security unit to Honeywell International Inc. for $4.95 billion.
Carrier
CARR,
said it plans to use $4 billion of the sale proceeds to pay down debt. The company said it now expects to resume stock buybacks when its leverage returns to about twice its annual earnings before interest, taxes, depreciation and amortization.
The acquisition of the maker of electronic locks for hotels and hospitals will be added to the building automation unit of Honeywell
HON,
It’s also a way for Honeywell to address a rise in demand for cloud-based products.
Honeywell said the transaction will strengthen its “alignment to the megatrend of automation, underpinned by digitization.”
The Carrier security unit will immediately add to Honeywell’s growth, gross margins and cash earnings per share in the first full year, Honeywell said.
The deal is expected to close by the end of the third quarter of 2024.
Evercore advised Honeywell on the deal, while Goldman Sachs and JPMorgan worked with Carrier.
Earlier, The Wall Street Journal reported the deal was underway.
Honeywell stock is down 7.7% in 2023, compared with a 19.4% gain by the S&P 500
SPX,
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