Fairfax to hike stake in Sanmar to 43% by the first half of 2019

Fairfax to extinguish $388 mn in bonds and interest in March 2019 and use half the proceeds to increase its stake in Sanmar

Fairfax India Holdings Corporation is set to increase its stake in Chennai-based Sanmar Chemicals Group to 43 per cent.

In 2016, Fairfax India had completed an investment in Sanmar, of $300 million (Rs 19.9 billion) in bonds maturing on April 22, 2023, along with common shares, representing 30 per cent equity interest. 

It subsequently signed an agreement with Sanmar pursuant to which the latter would settle the $300 million bonds along with 13 per cent on the date of cancellation. On March 31, 2019, the amount would work out to approximately $388 million (Rs 28.2 billion at the current exchange rate). 

Fairfax India will invest about half this consideration in the common shares of Sanmar, increasing its equity interest to approximately 43 per cent. 

The transaction is subject to customary closing conditions and third party consents, and is expected to be completed in the first half of 2019, said Fairfax.

As a result of this agreed transaction and positive operational developments at Sanmar, in the third quarter of 2018, Fairfax India will record investment gains of around $252 million (Rs 18.3 billion), consisting of approximately $190 million (Rs 13.8 billion) from common shares and $62 million (Rs 4.5 billion) from bonds, an increase in book value per share of approximately $1.62. 

The investment gain from the common shares of Sanmar is primarily supported by the continuing strong demand for PVC and related products in India, Europe, the Middle East and North Africa. Sanmar is capitalising on this opportunity with the implementation of new projects in India (under Chemplast Sanmar), and the successful capacity expansion in Egypt (TCI Sanmar).