In a bold move that underscores its commitment to the energy transition, Honeywell International Inc. (NYSE: HON) announced on Wednesday its agreement to acquire Air Products’ (NYSE: APD) liquefied natural gas (LNG) process technology and equipment business for $1.81 billion in cash. This acquisition, Honeywell’s fourth in 2024, signals the industrial giant’s aggressive push into the burgeoning LNG market and its determination to position itself as a key player in the global energy landscape.
The deal comes at a time when LNG demand is surging, particularly in power generation and data center applications. According to the Energy Information Administration, U.S. LNG exports are projected to reach 12.2 billion cubic feet per day in 2024 and 14.3 billion cubic feet per day in 2025, up from a record 11.9 billion cubic feet per day in 2023. This growth trajectory presents a significant opportunity for Honeywell to capitalize on the increasing global appetite for cleaner energy sources.
By acquiring Air Products’ LNG unit, Honeywell gains access to cutting-edge technologies such as heat exchangers and cryogenic equipment, which complement its existing LNG pretreatment business. The addition of Air Products’ coil-wound heat exchangers, known for their efficient liquefaction capabilities and minimal space requirements, will enhance Honeywell’s competitive edge in both onshore and offshore LNG applications.
From an investor’s perspective, this acquisition aligns perfectly with Honeywell’s strategic focus on three “mega trends” identified by CEO Vimal Kapur: automation, the future of aviation, and energy transition. The LNG business acquisition squarely addresses the energy transition pillar, potentially opening up new revenue streams and market opportunities for the company.
Financially, the deal is expected to be accretive to Honeywell’s adjusted earnings per share in the first full year of ownership. Analyst Sheila Kahyaoglu from Jefferies estimates that the transaction could boost adjusted earnings by approximately 1% in 2025. Moreover, Honeywell anticipates growth opportunities in aftermarket services and digitalization through its Forge platform, which could further enhance the deal’s long-term value proposition.
The acquisition also demonstrates Honeywell’s commitment to growth through strategic M&A activity. With this latest deal, the company is on track to deploy around $15 billion in acquisitions in 2024 alone, a clear indication of its aggressive growth strategy and confidence in its ability to integrate and leverage new technologies and market positions.
For investors, Honeywell’s move into the LNG space offers exposure to a critical segment of the energy transition. As countries worldwide seek to reduce their carbon footprint while ensuring energy security, LNG is increasingly seen as a crucial “bridge fuel” in the shift from coal to renewables. Honeywell’s enhanced capabilities in LNG technology position it to benefit from this global trend.
However, investors should also consider the potential risks. The LNG market can be volatile, subject to geopolitical tensions and fluctuations in global energy demand. Additionally, the success of the acquisition will depend on Honeywell’s ability to effectively integrate Air Products’ LNG business and leverage its technologies across its existing customer base.
Honeywell’s $1.81 billion acquisition of Air Products’ LNG business represents a strategic bet on the future of energy. This move positions the company as a more comprehensive player in the LNG value chain, potentially opening up new revenue streams and market opportunities. For investors seeking exposure to the energy transition trend through a diversified industrial giant, this deal enhances Honeywell’s appeal. The company’s ability to integrate this acquisition effectively and leverage its new technologies across its existing customer base will be crucial to realizing the full value of this investment. As Honeywell continues to align itself with key technological and market trends, investors should closely monitor how this strategic move contributes to the company’s long-term growth trajectory and its role in shaping the evolving global energy landscape.
