Honeywell Files Form 10 for the Spin-Off of Solstice Advanced Materials (SOLS)
Honeywell’s Advanced Materials business steps out as a pure-play; investors get two sharper narratives
Executive Summary
Honeywell International Inc. (Nasdaq: HON) files Form 10 in regards with the separation of its Advanced Materials division as Solstice Advanced Materials Inc. via a pro-rata spin-off to existing shareholders. The new company is expected to list on Nasdaq under “SOLS” in Q4 2025, with the distribution intended to be tax-free for U.S. federal income tax purposes (excluding any cash in lieu of fractional shares). Solstice launches with roughly $3.8B of 2024 sales and about $1.1B of adjusted EBITDA (~29% margin), supported by a stand-alone capital structure anchored by ~$2.0B of new debt and ~$450M of cash. Post-spin, Honeywell remains a quality-tilted industrial focused on Aerospace Technologies, Industrial Automation, Building Automation, and the non-Advanced-Materials portions of Energy & Sustainability Solutions.
Spin-Off Details
What is being spun off. The spin carves out Honeywell’s Advanced Materials business into Solstice, organized around two segments: Refrigerants & Applied Solutions (RAS) and Electronic & Specialty Materials (ESM). RAS serves low-global-warming-potential refrigerants, insulation, and applied chemistries; ESM spans semiconductor materials, specialty polymers, and high-strength fibers.
What the parent retains. Honeywell will continue with Aerospace Technologies, Industrial Automation, Building Automation, and the remaining Energy & Sustainability Solutions franchises. (Separately, Honeywell has outlined a plan to separate Automation and Aerospace in 2026; that is a later step and independent of this spin.)
Tax treatment. The distribution is intended to be tax-free to Honeywell shareholders for U.S. federal income tax purposes (except cash in lieu of fractional shares).
Timeline. Target completion is Q4 2025 (with the exact record date and distribution ratio to be confirmed in an amended information statement). Solstice common stock is expected to trade on Nasdaq as “SOLS.”
Why Spin-Off?
Strategic focus & capital allocation. Advanced Materials operates with R&D-driven product cycles and regulatory catalysts (e.g., the transition toward low-GWP refrigerants) that differ from Honeywell’s long-cycle aerospace and automation profiles. As independent entities, Solstice and Honeywell can set tailored capex, M&A, and incentive frameworks to fit their markets.
Benefits to companies. Each management team gets a cleaner mandate and right-sized capital structure. Solstice can prioritize specialty-materials innovation and regulatory alignment; Honeywell can double down on aerospace, automation, and building technologies.
Benefits to investors. Two purer exposures and cleaner comps: Solstice can be valued against specialty materials peers (with premium RAS margins), while Honeywell ex-spin screens as a higher-quality industrial led by Aerospace, potentially narrowing any conglomerate discount on both sides.
Parent (ex-SpinCo) Details
Honeywell retains Aerospace Technologies, Industrial Automation, Building Automation, and the non-Advanced-Materials pieces of Energy & Sustainability Solutions.
On 2024 reported figures, Honeywell posted $38.5B of sales across segments with healthy margins (Aerospace and Building Automation both in the mid-20s). Backing out Solstice’s ~$3.8B of sales implies ~$34.7B for Honeywell ex-SpinCo. Segment-level profitability will shift modestly once Advanced Materials exits ESS, but the remaining portfolio stays margin-rich and cash-generative, anchored by aerospace aftermarket strength.
SpinCo (Solstice) Details
Business profile & financials. Solstice launches as a focused specialty-materials company built around two operating segments: Refrigerants & Applied Solutions (RAS) and Electronic & Specialty Materials (ESM). In 2024, the business generated roughly $3.8 billion of sales and about $1.1 billion of adjusted EBITDA, an attractive ~29% margin. RAS is the earnings engine, with $2.72 billion in 2024 revenue and ~39% segment adjusted-EBITDA margin, driven by low-GWP refrigerants, insulation chemistries, and applied solutions. ESM contributed ~$1.05 billion of sales at ~19% segment margin.
Capital structure & liquidity (pro forma). At separation, Solstice expects ~$2.0B of new long-term debt (pro-forma book ~$1.97B after fees), ~$450M of cash, a $1.0B committed revolver (undrawn in the pro forma), and $750M of bilateral letter-of-credit facilities. The filing uses an ~6.4% weighted-average cost of debt, implying ~$130M of annual interest expense. Net debt screens at ~$1.5B, or roughly ~1.4× 2024 adjusted EBITDA, conservative for a high-margin materials business with RAS’s profile. Debt proceeds fund a cash distribution to Honeywell typical of spin structures. Dividend policy will be set post-listing, subject to covenant headroom.
Our Take
Solstice offers a pure-play, high-margin specialty materials story with secular tailwinds (low-GWP transitions, semiconductor materials), supported by manageable leverage and ample liquidity. Execution risk centers on pricing/regulatory cadence in refrigerants, raw-material volatility, the semiconductor capex cycle, and final financing terms. For Honeywell, the carve-out sharpens the narrative around aerospace and automation. With a separate Automation/Aerospace split targeted in 2026, investors get a multi-step catalyst path. Net-net, the spin should improve valuation clarity for both entities.