Friday, October 12, 2012

Honeywell acquisition of Thomas Russell

UOP, a Honeywell company in their Performance Materials and Technologies sector, recently acquired a 70% stake in Thomas Russell Co. for $525 million and also have rights to purchase the remaining 30%, which raised its involvement in natural gas processing.  Thomas Russel was a privately held, leading provider of technology and equipment for natural gas and processing and treatment.  With this acquisition, Honeywell will be able to provide shale and conventional natural gas companies with a broad range of technology and equipment to remove contaminants from natural gas and produce high quality natural gas liquids used for petrochemical and fuel.

This is a significant purchase in that they are investing the natural gas market and seeing the possibilities of growth.  With the agreement between ConocoPhillips, BP and TransCanada Corp. of building the pipeline between Alaska and Asia, this is definitely an emerging market that has much prospect for future growth.  Natural gas is not just showing growth for a few years ahead but rather for decades to come so I feel very positive about Honeywell's actions of trying to break into this market.  After this acquisition, Dave Cote stated in an interview, "We will keep making acquisitions in natural gas and invest in the UOP unit to develop new gas technology," Cote said, "I'm a big believer in natural gas and in what it can do for the U.S. economy and many economies around the world." With this, I see Honeywell only as a hold rather than a buy currently, as the UOP division is still only a small segment of their whole enterprise.

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