Honeywell Expands Communications Platform With EMS Tech Acquisition (HON, ELMG)

Honeywell International Inc. (NYSE: HON) is expanding its capabilities in rugged mobile computing and satellite communications this morning.  The conglomerate has just announced its plans to acquire EMS Technologies, Inc. (NASDAQ: ELMG) for its connectivity solutions.  The buyout price of $33.00 per EMS Tech share compares to a price of $24.80 as of Friday and it is also a share price premium that has never been seen in that stock.

Net of cash acquired, the deal is valued at roughly $491 million and it translates to roughly 13-times EMS’s 2010 EBITDA.  That comes to about 9-times EBITDA excluding certain corporate costs.

EMS’s $181 million Global Resource Management division provides “highly ruggedized mobile computing products and services for use in transportation, logistics, and workforce management settings as well as secure satellite-based asset tracking and messaging technology for search and rescue, warehousing, and field force automation environments.” Its $174 million Aviation division provides terminals, antennas, in-cabin network devices, rugged data storage, and surveillance applications.

Honeywell noted that all directors and officers of EMS plan to tender all of their shares in the merger.  The transaction is expected to close in the third quarter of 2011.

Honeywell did note that the deal would be “dilutive in 2011 by three to four cents” but also noted that the deal is not expected to impact its prior 2011 earnings per share guidance.  The company actually expects the deal to be accretive to earnings in 2012.

The move is huge news for EMS Tech holders but is only a footnote at Honeywell as its market cap is already $43.7 billion.  Honeywell closed at $55.53 on Friday and its 52-week trading range is $37.89 to $62.28. We expect no interruption in Honeywell’s dividend growth in the year ahead due to this transaction.

JON C. OGG