Textron Prepares for Separation of $3B+ Industrial Group
Textron Inc. leaders are preparing to say goodbye to the company’s industrial operations, which include automotive supplier Kautex and E-Z-Go golf carts, to focus on its booming aerospace and defense businesses.
Executives of Rhode Island-based Textron said April 30 that they haven’t yet decided if they’ll spin off the industrial group, which is on pace for $3.2 billion in sales this year, or if they’ll outright sell the division. But either way, CEO Lisa Atherton said, the goal is to have the future Textron be a pure-play aerospace and defense company.
“It provides clarity and simplification on our capital allocation and investments,” Atherton told analysts on a conference call in which she also noted that the Textron board had considered this scenario in the past. “And frankly, it also just aligns them both with their respective natural shareholder bases.”
The math for a separation is pretty apparent: Textron’s aerospace business, which include the Cessna and Bell brands as well as weapons and electronics systems and have annual sales of about $12 billion, have profit margins of about 11%. The industrial group, on the other hand, produces a segment margin of about 5%—and that number has risen since Textron sold off its powersports group a year ago.
Textron’s industrial group comprises Kautex, which makes plastic fuel systems and battery enclosures among other things, as well as specialized vehicles that manufacturers large mowers and ground-support equipment in addition to golf carts. It is home to about 7,000 employees who may or may not remain under the same umbrella. Asked if Textron’s leaders plan to keep the group as is or split its divisions, Atherton said “those options are all on the table.”
“As the process evolves and folks are interested, we’ll do what’s in the best interest of our shareholders,” she said on the conference call. “We’ve got an exciting future ahead of us.”
In preparing to split itself into pieces, Textron is joining a list of companies that have gone that route in recent years, seeking focus and (for some businesses) higher margins over the benefits of diversification. Among the most prominent companies to do so in the manufacturing world are:
- General Electric, which spun off its healthcare and energy units—with the latter now being valued almost as highly as GE’s core aerospace business
- Honeywell, which last fall spun off what is now Solstice Advanced Materials and is on track to separate its aerospace group later this year as its leaders focus on automation
- DuPont de Nemours, whose executives last November spun off its electronics division as Qnity, a business that now has a market capitalization of $29 billion versus about $19 billion for the remaining DuPont
Looking to the success of those examples, investors applauded the plans by Atherton and her team. Shares of Textron (Ticker: TXT) rose nearly 7% April 30, growing the company’s market capitalization to $16.7 billion.
About the Author
Geert De Lombaerde
Senior Editor
A native of Belgium, Geert De Lombaerde has been in business journalism since the mid-1990s and writes about public companies, markets and economic trends for Endeavor Business Media publications, focusing on IndustryWeek, FleetOwner, Oil & Gas Journal, T&D World and Healthcare Innovation. He also curates the twice-monthly Market Moves Strategy newsletter that showcases Endeavor stories on strategy, leadership and investment and contributes to other Market Moves newsletters.
With a degree in journalism from the University of Missouri, he began his reporting career at the Business Courier in Cincinnati in 1997, initially covering retail and the courts before shifting to banking, insurance and investing. He later was managing editor and editor of the Nashville Business Journal before being named editor of the Nashville Post in early 2008. He led a team that helped grow the Post's online traffic more than fivefold before joining Endeavor in September 2021.