Carrier: Announces Sale of Security Business to Honeywell for $4.95 Billion, or 17 Times 2023 EBITDA

Narrow-moat-rated Carrier is in the midst of a major portfolio transformation. It expects to complete its EUR 12 billion acquisition of Viessmann, a large player in the European heat pump and boiler market, in early January, and the firm will also divest its security, commercial refrigeration, and fire businesses. On Dec. 8, Carrier announced that it has reached an agreement with Honeywell to sell its security business for $4.95 billion, or 17 times adjusted 2023 EBITDA. This business consists of three brands: LenelS2 (commercial and enterprise access solutions), Onity (electronic locks with significant hospitality market presence), and Supra (real estate lock boxes). Together, we estimate these businesses generate approximately $1 billion of sales with an EBITDA margin in the high-20% range. We think Carrier received a favorable price for these assets, and we’ve raised our fair value estimate 2% to $50 per share after incorporating the security sale into our valuation model. We’re also now incorporating the Viessmann acquisition into our explicit financial forecast. We continue to view the acquisition as roughly value neutral based on our current growth and profitability outlook for the business.