Honeywell International Inc., blocked in an attempt at a record $90 billion takeover, is going back to its traditional pursuit of smaller deals with a $1.5 billion purchase of warehouse automation company Intelligrated.
The acquisition will help Honeywell tap into fast growth for fulfillment centers spurred by online commerce, according to a company statement Friday. Intelligrated, which is owned by a company backed by U.K. buyout firm Permira, is expected to generate 2016 sales of $900 million after increasing revenue by an annual average of 13 percent in the last three years, Honeywell said.
The maker of building systems, aerospace components and refinery equipment scrapped an offer for United Technologies Corp., with Honeywell Chief Executive Officer Dave Cote telling investors in March that the bid was a one-time, unique opportunity. United Technologies rebuffed the proposal, which also drew opposition from customers including planemaker Airbus Group.
The Intelligrated deal "does fit in a little better historically with their mode of operation. They tend to do more deals in this size range than trying to do a mega-deal," Jeff Windau, an analyst at Edward Jones, said in a telephone interview. "The mega-deal is flashy but sometimes draws a lot of questions."
Honeywell shares rose 0.5 percent to $116.87 at 11:57 a.m. in New York while the Standard & Poor's 500 Index gained 0.3 percent.
Intelligrated designs, manufactures and installs warehouse automation systems, and fits with Honeywell's scanning and mobility business, which makes hand-held computers used by warehouse operators.
"E-commerce continues to grow at an unprecedented rate and customer demands for faster delivery times have created a need for warehouse, logistics and fulfillment solutions that can increase productivity and lower costs for our customers," Alex Ismail, chief of Honeywell's Automation and Control Solutions unit, said in the statement.
The price is 12 times Intelligrated's annual earnings before interest, taxes, depreciation and amortization. Intelligrated, based in Mason, Ohio, employs more than 3,100 people and provides service to 30 of the top 50 retailers, Honeywell said.
The Intelligrated transaction, which is Honeywell's largest purchase so far this year, is expected to close by the end of the third quarter. Cote stepped up deal making with a $6 billion shopping spree last year, the most since he took over as CEO of Morris Plains, New Jersey-based Honeywell in 2002.
Industrial companies have turned to acquisitions to spur profit as a sluggish global economy has crimped sales growth. Honeywell's sales fell 4.3 percent in 2015 to $38.6 billion, dragged down by a drop in oil and gas investment. This year, Honeywell expects sales of as much as $40.9 billion.
Permira purchased Intelligrated in 2012 for about $500 million. The supply-chain company since has expanded into Brazil, China and Mexico and increased revenue more than 90 percent, Permira said in a statement.