Investment holding company Fairfax India, through wholly owned subsidiaries, is to invest US$300 million in Sanmar Chemicals Group. The deal will be done by a combination of equity and fixed income securities resulting in Fairfax India acquiring a 30% stake in Sanmar while generating a fixed return on its investment.
Fairfax India is limited to investing no more than 25% of its total assets in any single investment, which equates to roughly US$250 million. The company will therefore fund an initial tranche of US$250 million when the transaction closes and add a second tranche of US$50 million within 90 days after that through Fairfax Financial Holdings or another investor.
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The first tranche is expected to be completed in the second quarter of 2016, subject to certain conditions including the establishment of a US$280 million term loan facility for TCI Sanmar Chemicals Egypt, the Egyptian subsidiary of Sanmar, by its lenders.
Sanmar is one of the largest suspension polyvinylchloride (PVC) manufacturers in India with an installed capacity of almost 300,000 tonnes a year. It is also the largest specialty PVC company in India. The company is currently expanding its PVC capacity in Egypt from 200,000 to 400,000 tonnes a year. Once the expansion is completed, Sanmar will have a total PVC capacity of over 700,000 tonnes a year, making it one of the largest PVC companies in the world.
Partner Ashwin Ramanathan and senior associate Roxanne Anderson at AZB & Partners are advising Fairfax on the transaction.
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