Resideo Technologies announced Tuesday it will spin off its ADI Global Distribution business into a separate publicly traded company and pay $1.59 billion to Honeywell International to settle future obligations under an existing indemnification agreement.

The spin-off, expected to close in the second half of 2026, will separate Resideo’s two major business units: ADI, a wholesale distributor of low-voltage and audiovisual products, and its Products and Solutions (P&S) segment, which makes residential building products including controls and sensors.

Resideo President and CEO Jay Geldmacher said the move will allow both businesses to focus on their respective strategies and accelerate growth.

“Through continued growth and investment, ADI and P&S are leading players in their distinct areas,” Geldmacher said in a statement. “… We believe a separation is the next, most natural step.”

ADI, which will become an independent company, posted $4.5 billion in revenue in the 12 months ending March 29 with an adjusted EBITDA margin of 7.5%. The P&S segment generated $2.6 billion in revenue with an adjusted EBITDA margin of 24.2%.

ADI serves both residential and commercial markets in categories such as security, fire, AV, access control and data communications. Its portfolio includes more than 500,000 professionally installed products and proprietary brands like Control4, Araknis Networks and WattBox.

Resideo will continue to operate the P&S segment, with plans to expand its footprint in the connected home market. The company said it works with more than 100,000 professional installers and completes over 15 million product installations annually through brands including Honeywell Home, First Alert and Braukmann.

The spin-off is intended to be tax-free for U.S. federal income tax purposes and is subject to customary closing conditions, including regulatory approvals and the completion of required filings with the Securities and Exchange Commission. Shareholder approval is not required.

As part of Tuesday’s announcement, Resideo also said it will pay Honeywell a one-time lump sum of $1.59 billion in the third quarter of 2025, eliminating future payments under a 2018 indemnification and reimbursement agreement. That deal had required Resideo to make payments of up to $140 million per year through 2043.

Geldmacher, who previously announced plans to retire, will step down upon completion of the separation. Tom Surran will continue to lead the P&S segment, while Rob Aarnes will lead ADI.

Resideo is expected to report its second-quarter earnings and provide updated guidance on Aug. 5.