DBRS Comments on Honeywell’s Acquisition of Sperian Protection

DBRS notes that Honeywell International Inc. (Honeywell or the Company) today announced the acquisition of Sperian Protection (Sperian), a leading designer and manufacturer of personal protection equipment, for $1.4 billion in cash (including the assumption of debt). Honeywell can easily fund the acquisition internally with a modest impact on its financial profile, and a rating action is not warranted.

DBRS expects that the Company will not have any issues financing the acquisition, given its large cash position (over $2.8 billion at March 31, 2010) and consistently strong free cash flow generation. Net leverage will modestly increase on a pro forma basis but remain acceptable for Honeywell’s long- and short-term ratings of A (low) and R-1 (low), respectively, and liquidity should remain strong. The financial contribution from Sperian will not be material, with roughly $900 million (EUR 660 million) in revenues in 2009. However, the combination should provide some modest synergies and will strengthen the Company’s Life Safety business, which is part of its Automation and Controls Solutions division.

Sperian’s Board of Directors has approved the acquisition, which is expected to close in Q3 2010 following the necessary regulatory approvals. The acquisition follows Honeywell’s purchase of Norcross Safety Products L.L.C., a leading designer, manufacturer and marketer of branded personal protection equipment products, in 2008 for $1.2 billion. Norcross and Sperian will be integrated as a single global business and should benefit from the larger scale and diversification of its businesses.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The applicable methodology is Rating Industrial Products Companies which can be found on our website under Methodologies

This is a Corporate rating.