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. Last Updated: 07/27/2016

Allied and Honeywell in $14Bln Merger




NEW YORK -- Allied Signal Inc., the diversified manufacturer, and Honeywell Inc., the Minneapolis-based maker of electronic controls, announced Monday that they will merge, in a stock swap valued around $14 billion.


The deal will create a company with $25 billion in annual sales and a market capitalization in excess of $45 billion. The combined company will be called Honeywell International, and will be based in Morristown, New Jersey, Allied's current headquarters.


Under its terms, people close to the negotiations said, Honeywell shareholders will receive Allied Signal stock valued at a 4.2 percent premium over their existing shares, based on Friday's closing prices. Honeywell's shares surged by 9.5 percent on Friday after reports of a possible deal circulated.


The merger is expected to eliminate 4,500 jobs, with 2,000 of those coming in the first six months after the deal is completed.


Monday's expected announcement marks the culmination of three months of secret talks between Lawrence Bossidy, Allied's chairman, and Michael Bonsignore, Honeywell's chief executive. According to people close to the talks, the two men met several times in hotels in New York and Chicago - and pretty much anyplace except Minneapolis or Morristown, where their presence would inevitably be noticed.


Bonsignore and Bossidy had talked on and off about a merger for several years, but had never come up with a deal that both thought acceptable. People close to the talks intimated that Bonsignore felt that Honeywell would lose more than it would gain from a merger.


But this time, Bossidy was still smarting from the failure of his $10 billion hostile run at AMP Inc., the electrical-connector company that merged with Tyco International last year. And his retirement, scheduled for April 2000, was looming without an obvious successor in sight. So, a new spirit of compromise entered the picture. "This was the first time the talks got to this level of detail," someone close to the process said.


The deal they hammered out, in fact, represents major compromises for both companies. After 114 years of calling Minneapolis home, Honeywell must move its headquarters to Morristown. And Allied will see its name disappear altogether.


"The Honeywell brand name is known around the world, but there is a real business advantage to being on the East Coast," a person close to the talks said.


For now, Bossidy will be chairman of the combined company, and Bonsignore will be its chief executive.