Fairfax India Holdings Corporation, part of India-born Canadian billionaire Prem Watsa's Fairfax Group, has agreed to invest $250 million in Sanmar Chemicals Group as part of a larger deal.
This marks the fifth deal for Fairfax India, a public listed investment fund sponsored by Canadian investment firm Fairfax Financial, in the country within nine months. It is now estimated to have deployed around $880 million of its $1.06 billion corpus raised last February with a listing on the Toronto Stock Exchange, making it one of the most prolific PE investors in India (click here for the most active PE investors of 2015).
The larger deal involves Fairfax India investing $250 million in an initial tranche upon the closing of the transaction and Fairfax Financial or any other investor putting in another $50 million within 90 days in the second tranche, taking the total investment in Sanmar to $300 million. The deal is structured this way because Fairfax India is limited to investing no more than 25 per cent, or about $250 million, of its total corpus in any single investment.
Fairfax India will invest through a combination of equity and fixed-income securities and will own a 30 per cent stake in Sanmar. It will also generate a fixed return on its investment.
The first tranche is expected to be completed by June 30 upon the satisfaction of certain conditions, including the establishment of a term loan facility for $280 million between TCI Sanmar Chemicals Egypt, the Egyptian subsidiary of Sanmar, and its lenders.
Privately held Sanmar is one of the largest makers of suspension polyvinyl chloride (PVC) in India with an installed capacity of 300,000 tonnes a year, apart from being the largest speciality PVC company in the country. Sanmar is doubling its PVC capacity in Egypt to 400,000 tonnes a year. This will take its total PVC capacity to 700,000 tonnes, making it among the largest PVC companies in the world.
Sanmar also makes caustic soda, chloromethanes, refrigerant gases, industrial salt and speciality chemical intermediates.
Sanmar chairman N Sankar said the company will benefit by having a financially strong shareholder in Fairfax with a global footprint.
Watsa, chairman of Fairfax India, said that Sanmar “is well placed to cater to the growing demand for PVC in the emerging markets of India, the Middle East and Europe”.
Watsa is also the founder of Fairfax Financial and regarded as the Warren Buffett of Canada. Enthused with the plans of the new government that took reins of the country in 2014, he had created Fairfax India with $300 million commitment from Fairfax Financial. With other cornerstone investors followed by an initial public offering and underwriters' portion, Fairfax India raised $1.06 billion in February 2015.
It announced its maiden investment in financial services provider IIFL (formerly India Infoline) and later invested in National Collateral Management Services and ADI Finechem. Last month, it signed an agreement to invest in GVK-run Bangalore International Airport (this also involved Fairfax Financial as the deal value exceeded the $250 million ceiling). Sanmar is the second chemicals firm, after ADI Finechem, where Fairfax India has invested.
Separately, Fairfax Financial has put in more money into the country as it raised its holding in general insurance firm ICICI Lombard. Fairfax Financial also owns a majority stake in Thomas Cook, a travel and tour operator, and through it controls business services firm Quess Corp. In February, Quess Corp filed papers with capital markets regulator SEBI to float its IPO.