Honeywell shares surge after billionaire activist Loeb calls for aerospace spinoff

Key Points
  • Third Point's Loeb wants Honeywell to spin off its aerospace segment
  • Loeb is pushing for management to transform the conglomerate into a "software industrial company"
  • Honeywell is now a top five holding of Third Point, a person familiar with the fund said.
David Cote
Ashlee Espinal | CNBC

Shares of Honeywell surged Friday following news that activist investor Dan Loeb's Third Point is pushing for the conglomerate to spin off its aerospace unit.

"Third Point believes that a separation of the Aerospace unit via a spin off transaction would result in a sustained increase in shareholder value in excess of $20 billion," a letter from the fund said. "Spinning off Aerospace would transform Honeywell into an industrial growth company with a focus on automation and productivity.'

Third Point owned 1.4 million shares of Honeywell as of Dec. 31. But the fund has substantially increased that position and it is now a top-five holding, according to a person familiar with the fund. Shares of Honeywell gained 3.5 percent in morning trading.

Five-day performance of Honeywell

Source: FactSet

In a statement, Honeywell said it "strives to keep an open dialogue with all of its shareholders. We are focused on enhancing shareholder value and will continue to evaluate all ideas that have the potential to help us achieve this goal."

Honeywell's aerospace segment is its largest in terms of revenues and represented just under 40 percent of the company's total annual sales of $39.3 billion in 2016. But operating margins for the aerospace segment were lower last year and it is expected to experience a second year of falling revenue in 2017.

As of Friday's close, shares of Honeywell are up 20 percent over the past six months.

— CNBC's Scott Wapner contributed reporting.