Investors felt ensure enough about security-products specialist Allegion (ALLE 5.00%) to push its share price up by 5% on Friday. This had little to do with the company directly; rather, a major acquisition in the security space was the main impetus for the price lift. The resulting pop bettered the performance of the S&P 500 index on the day — it rose by 0.3%.
Honeywell’s $4.95 billion Carrier deal got investors excited
It’s always news when storied industrial conglomerate Honeywell International (HON -1.61%) makes a big-ticket buy. That was the case on Friday, when the company announced it had agreed to pay $4.95 billion in cash for Carrier Global‘s (CARR 4.50%) global access solutions business (essentially, its property security unit).
What caught the market’s eye about the deal was that it carried Carrier’s share price nearly 5% higher. Again, that’s just for one unit of the company. Investors clearly believe Allegion has the potential to command a premium too, either piece by piece or in its entirety.
In Honeywell’s press release on the arrangement, it said that a key reason for engingeering it is that it “will boost Honeywell Building Technologies’ business model of leading with high-value products that are critical for buildings.” That description can also easily apply to Allegion’s offerings.
Might Allegion be a takeover target?
Allegion hasn’t officially commented on the Honeywell-Carrier deal, but you can be sure it’s being discussed eagerly in the C-suite. Allegion wouldn’t be a cheap company to buy in its entirety — its market cap is approaching $10 billion — but perhaps there’s a deep-pocketed company hungry enough to extend its security business that it would be willing to pay up for such assets.
Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
