Investors felt secure enough about security-products specialist Allegion(NYSE: ALLE) 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(NASDAQ: HON) 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 (NYSE: CARR) 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 enhance 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 expand its security business that it would be willing to pay up for such assets.
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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.
