AlliedSignal and Honeywell have announced that they have received clearance from the European Commission to complete their merger. The companies completed the merger after the close of trading on the New York Stock Exchange on 1 December 1999, marking the historic launch of a new $24 billion global technology company operating under the Honeywell name. The merger combines two global players to create a Fortune 50 company that brings together considerable management talent and diverse, successful and complementary businesses. The new company's stock will commence trading under the symbol HON as from 2 December on the New York Stock Exchange. The stock also will trade on the London, Chicago and Pacific stock exchanges.
"Today is an exciting day for the shareowners, employees and customers alike," said Lawrence A. Bossidy, Chairman of the new Honeywell. "We are embarking on a wonderful journey as a newly minted global technology powerhouse. The new Honeywell is a broader and more resilient company, possessing the efficiency, diversity and durability to generate consistent earnings performance and growth."
The merger will be immediately accretive to earnings, with earnings per share expected to grow by 20% in 2000 and at a compounded annual rate of at least 18% over the next three years. Annual operating margin is expected to grow at least one point per year from 14% in 1999 and free cash flow before dividends is expected to be $3 billion in 2002. Honeywell will have an annual revenue-growth goal of 8% to 10%.
Commenting on the implications for Honeywell locally, MD Nick Buick said, "Although it is still early to fully appreciate the local implications, I believe the repercussions for southern Africa will be positive. The considerable impact of the merger on free cash flow will facilitate and accelerate further advances in technology across all our interests worldwide. In addition, during the months to come, the main task of the new Honeywell will be to further explore the synergies between the two previously separate companies to discover where each can add value to the other. Locally it will be our task to utilise this synergy to grow both sides of the business throughout our region to benefit local commerce and industry".
Integration teams find additional cost savings
The past five months have been spent developing comprehensive integration plans that will be swiftly implemented across the new company. The bulk of integration activities are expected to be complete by mid-year 2000. Integration teams have found additional opportunities for cost savings primarily through the combining of the companies' global infrastructures, implementing the shared services concept which includes the consolidation of information systems and leveraging the combined company's purchasing strength. The previously announced cost-savings estimate for 2002 has therefore increased to $750 million from $500 million.
Revenue synergies and growth opportunities
Honeywell is pursuing a variety of new revenue growth opportunities. One example is the emerging free-flight system in the aviation industry. The free-flight system will lead to more on-time flights; less airway congestion and lower operating costs for airlines by enabling aircraft to use travel routes outside of traditional airways. Honeywell is leading a team of avionics companies working with the FAA to develop the software that will serve as the backbone of the free-flight communications system. The free-flight market is expected to be a $10-billion industry and the company's broad range of avionics products and integrated systems will play an important part in the free-flight system.
A number of key growth opportunities also exist in the area of e-business. Examples include MyPlant.com (www.myplant.com) which provides customers with easy access to a broad range of Honeywell's and third parties' process industry solutions.
The new Honeywell is well positioned for both short and long-term growth, with more than 75% of its products leading their respective industries and most having superior technological positions. Many of these product offerings lead to significant service revenues beyond the original sale. The company's broad services and solutions portfolio includes more than 10 000 patents and proprietary solutions.
Honeywell Southern Africa
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