Honeywell International Inc. is spinning off its resins and chemicals business into a new publicly traded company named AdvanSix Inc.
Erin Kane will be president and CEO of AdvanSix. She has been vice president and general manager of the resins and chemicals business since October 2014.
“Our $1.3 billion resins and chemicals business enjoys a leading position in the industries it serves and a global cost advantage,” said Honeywell Chairman and CEO Dave Cote, in a May 12 news release. “It is favorably positioned to continue to achieve global growth as a standalone enterprise, with added flexibility to make capital investments that enhance its offerings and service to customers.”
The new company will include Honeywell's leading nylon 6 resin and film business. AdvanSix also will include the company's caprolactam operations — caprolactam is a nylon precursor — plus ammonium sulfate fertilizers and chemical intermediates, including phenol, acetone and cyclohexanone.
The deal is scheduled to be completed in early 2017.
Morris Township, N.J.-based Honeywell had been working with financial advisers on options for the business, and published reports last month said the company was considering either spinning off or selling the unit.
About the business
Upon completion of the spin-off, AdvanSix will be an independent, leading global manufacturer of nylon 6, which is used to make engineered plastics, fibers, filaments and films. Key end markets include automotive, electronics, carpet, sports apparel, fishing nets, and food and industrial packaging.
Honeywell has reported results for the resins and chemicals business had 2015 pre-tax profit of $107 million, and net profit of $68.1 million.
Nylon 6 resin sales account for $312.4 million in 2015 sales, or 24 percent of the new company's total.
Honeywell said the global market for nylon 6 and caprolactam has changed significantly in the past five years, as Chinese manufacturers have entered the market and increased global supply. The company cited a report that estimates that Chinese manufacturers account for 43 percent of global nylon 6 resin capacity, up from 26 percent at the end of 2010.
“As a result of the increased capacity and competitive intensity, the margins for nylon 6 resin and caprolactam have declined in recent years to historic lows,” the company said in a document filed with the U.S. Securities and Exchange Commission on May 12.
Honeywell's deal is similar to one that a major competitor executed last year. In August, Royal DSM NV finalized a deal that sold a 65 percent stake in two of its chemicals subsidiaries — including its nylon and caprolactam operations — to investment firm CVC Capital Partners Ltd. DSM said it wanted to focus on its more profitable life sciences business.
Honeywell claims to be the lowest-cost producer of nylon chemicals, but the company still faces competition, especially from manufacturers in Asia, as well as from DSM and BASF SE. BASF supplies caprolactam to DuPont Co. — another nylon resin supplier that has a pending change in ownership, its mega merger with Dow Chemical Co.
Details about the deal
The spin-off of AdvanSix will be tax-free to Honeywell shareowners.
“Following the spin-off, Honeywell and AdvanSix will each have a more focused business and be better positioned to invest more in growth opportunities and execute strategic plans best suited to its respective business,” Cote said.
“The transaction will create added value for our shareowners, who will receive AdvanSix shares tax-free in addition to the Honeywell shares they already own.”
Cote called Kane “uniquely qualified to lead the new, independent company.
“She has extensive experience in managing the global resins and chemicals business, having served in a number of business roles with increasing responsibility over the last eight years. As head of the resins and chemicals business over the last two years, she helped the business expand its product portfolio while maintaining the operational and cost advantages that it enjoys.
“Her deep industry experience and business acumen, combined with the experience she has honed in general management, marketing, and operational positions while at Honeywell, will allow Erin to provide strong leadership for the new company.”
Kane has held numerous marketing, management and business director roles within Honeywell, which she joined in 2002. Prior to joining Honeywell, Kane held Six Sigma and process engineering positions at Elementis Specialties and Kvaerner Process.
Last year Honeywell added almost 90 million pounds of annual nylon resin capacity at its plant in Chesterfield, Va. The new production makes both Aegis-brand nylon 6 and copolymer nylon 6/6/6 resins.
Honeywell also is the 55th largest film and sheet manufacturer in North America, according to Plastics News' most recent ranking, with estimated sales of $120 million.