Summary
Honeywell International Inc. announced on January 30, 2003, a significant strategic transaction involving its Bendix friction materials business. The company has entered into a letter of intent with Federal-Mogul Corp. to sell this business. The core of this deal is not just the sale of assets but rather the exchange of these assets for a critical bankruptcy court injunction. This injunction would permanently shield Honeywell from all current and future personal injury asbestos liabilities associated with its worldwide friction materials operations. This transaction is contingent upon Federal-Mogul's emergence from Chapter 11 bankruptcy and requires Bankruptcy Court approval, along with other customary conditions. The proposed deal also involves the establishment of a bankruptcy trust to benefit present and future asbestos claimants. Honeywell will continue to manufacture friction materials for Federal-Mogul on a contract basis for up to two years post-closing. Investors should note that this move appears to be a proactive measure to resolve significant asbestos-related liabilities, which have historically posed a substantial risk for companies in this sector.
Key Highlights
- 1Honeywell to sell its Bendix friction materials business to Federal-Mogul Corp.
- 2The sale is contingent upon Federal-Mogul's emergence from Chapter 11 bankruptcy.
- 3Key element of the deal: Honeywell receives a bankruptcy court injunction to shield it from all current and future asbestos liabilities related to the friction materials business.
- 4A bankruptcy trust will be established for asbestos claimants.
- 5Honeywell will continue to manufacture friction materials for Federal-Mogul on a contract basis for up to two years post-closing.
- 6Federal-Mogul will acquire the Bendix and Jurid brand names for friction products, while Honeywell retains Bendix for aerospace.
- 7The Bendix friction materials business is part of Honeywell's Transportation & Power Systems group.