Since taking charge as chief executive in June 2023, Vimal Kapur has steered the company toward three "compelling megatrends" - automation, the future of aviation and energy transition.
The all-cash transaction with private equity firm Advent International for CAES is Honeywell's third deal this year.
"We do believe there has been a demonstrable uptick in deal activity this year under Vimal's leadership, a growth dimension that was notably missing under the previous CEO," said Deane Dray, equity analyst at RBC Capital Markets.
CAES develops electronics such as antenna systems and communication networks for aerospace and defense companies, and the deal comes when orders have surged in response to drawn-out conflicts, including Russia-Ukraine and Israel-Hamas.
The deal complements Honeywell's offerings on programs such as Lockheed Martin's (LMT.N) F-35, Boeing's (BA.N) EA-18G, and missiles including Raytheon's (RTX.N) AMRAAM, Sheila Kahyaoglu, equity analyst at Jefferies, said in a note.
Advent completed its buyout of CAES (then Cobham Advanced Electronic Solutions) for $5 billion in January 2020 and later carved out CAES as a standalone entity in 2021.
The CAES deal, which is expected to close in the second half of 2024, will add to Honeywell's adjusted earnings per share in the first full year of ownership.
With the CAES acquisition, the company has deployed just under $10 billion, or about 40% of the targeted amount set in 2023 for M&As and buybacks, halfway through the targeted timeline of three years, Dray said.
The deal will provide additional automated facilities and about 2,200 employees, many of them highly skilled engineers who could boost the aerospace operations, Honeywell said.
