Kolon, Hyosung to give up control over nylon material maker Capro

South Korea’s Hyosung Group and its longtime rival Kolon Group in the fiber, textile and petrochemical businesses are poised to give up their management control over Capro Co., the country’s sole maker of caprolactam, a nylon raw material.

According to the Financial Supervisory Service, Kolon Industries Inc. recently changed the purpose of its holding of shares in Capro to simple investment from participation in management.

The decision follows a similar move in November by Hyosung TNC Corp., which also restated the purpose of its holding of a stake in Capro as a simple investment.

Hyosung and Kolon are Capro’s two largest shareholders with stakes of 12.75% and 9.56%, respectively.

Under the Capital Markets Act, shareholders whose purpose of stakeholding is simple investment cannot exercise their rights related to control of their invested companies such as requests for the appointment and dismissal of executives.

With the restatement of their shareholdings in Capro, both Hyosung and Kolon are expected to dispose of significant portions of their shares in the caprolactam maker, industry watchers said.

LOST INTEREST AS CARPO FACES FIERCE CHINESE COMPETITION

Analysts said Kolon and Hyosung lost interest in Capro as the Korean caprolactam maker faces growing competition with Chinese rivals, which bring their products into the Korean market at significantly lower prices.

Capro posted 89.8 billion won ($72.4 million) in operating losses in the first nine months of last year. The company is known to be in a state of partial capital impairment with its debt-to-equity ratio at 674.5% at the end of September.

Established as a state-run company in 1965, Capro began producing nylon raw materials in 1974, which had been imported into Korea.

In a fight over the management of the company, Hyosung and Kolon purchased 20% and 19.2% of Capro, respectively, when it went public in 1974 to secure a stable supply of caprolactam.

At one point in 1996, the Kolon Group filed a complaint with the prosecution, saying Hyosung allegedly increased its stake in Capro to 57.6% by mobilizing borrowed-name accounts of its employees.

Kolon and Hyosung have been rivals for decades, particularly in the fiber and textile businesses.

Write to Ik-Hwan Kim at lovepen@hankyung.com
In-Soo Nam edited this article.