Honeywell Said to Consider Sale of Nylon Chemicals Business

  • Financial adviser working on options for caprolactam business
  • Increased Chinese production has pressured producers' margins

Honeywell International Inc. is considering exiting its business that makes chemicals for manufacturing nylon, according to people with knowledge of the matter.

Honeywell is working with financial advisers on options for the caprolactam unit, which could be spun off or sold, said the people, who asked not to be identified because the plans aren’t public. The business earmarked for divestment generates an estimated $150 million to $200 million in profit, according to one of the people. It could fetch about $1 billion, a separate person said.

A spokesman for Honeywell declined to comment.

Any separation would mean Honeywell is mirroring an earlier move by Royal DSM NV of the Netherlands amid heightened competition from Chinese manufacturers that have increased exports to the U.S. DSM last year agreed to sell a majority stake in its resins and caprolactam business to CVC Capital Partners Ltd. to hone its focus on more profitable nutritional ingredients.

Honeywell has said that it’s the lowest-cost producer of nylon chemicals, after years spent fine-tuning the business to focus on large manufacturing hubs. The U.S. company prided itself on getting through the financial crisis relatively unscathed while other higher-cost competitors mothballed caprolactam sites.

Asian players have expanded in the market and added capacity, putting pressure on margins. Caprolactam is used in a broad range of products including carpets. Honeywell also supplies a byproduct called ammonium sulfate, used as a fertilizer. Its plant in Hopewell, Virginia is the world’s largest caprolactam producer, having operated continuously since it was first built in 1928. Honeywell in 2013 agreed to pay civil penalties and improve emissions at the site amid alleged pollution violations.

Alongside the DSM and CVC venture, BASF is the other major manufacturer of caprolactam in the U.S.

Honeywell shares opened 0.5 percent lower at $112.52 in U.S. trading Thursday.

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