Bain to acquire Fabbrica Italiana Sintetici

The private equity firm Bain Capital will acquire Fabbrica Italiana Sintetici (FIS), a pharmaceutical chemical producer based in Montecchio Maggiore, Italy, for an undisclosed sum.

The seller is Nine Trees Group, the holding company of the Ferrari family, which started FIS in 1957. The group’s holdings include Anemocyte, a biotech firm specializing in plasmids and mRNA.

In a related deal, the French company Minakem has acquired Delmar Chemicals, a Montreal-based drug chemical firm that FIS acquired in 2011.

The deal with Bain follows months of speculation about a possible purchase of FIS. A recent report in the Italian financial journal Il Sole 24 Ore said the Italian competitor Olon, in a partnership with the private equity firm Permira, was the lead contender in a field of several potential buyers that included Bain.

Olon CEO Paolo Tubertini says in a statement that the company is “actively looking for acquisition opportunities.”

Industry observers have been anticipating a deal to acquire FIS for at least 2 years, pointing to the company’s heavy debt load resulting from a string of investments, including the acquisition of Delmar and a facility in Lonigo, Italy, from Zach System. FIS has also lost important contracts.

There is also speculation that FIS, which generated sales of $770 million in 2022, has outgrown its family ownership. With three sites in Italy, FIS currently employs about 2,000 people including 250 R&D scientists. It claims about 300 customers worldwide.

“What the family wanted most, probably, was to exit because of the debt situation,” says Roger Laforce, an industry consultant who was general manager for commercial and R&D operations at FIS from 2004 until 2011. According to a 2022 balance statement, the company carried over $400 million in debt.

Laforce estimates that Bain paid about $1 billion for FIS, using a rule of thumb for valuing an acquisition based on pretax earnings. He notes that the article in Il Sole 24 Ore had a similar estimate.

The acquisition is the latest in a yearslong trend of private equity firms acquiring pharmaceutical chemical producers, several family-owned. But it still took some industry watchers by surprise.

“I thought for sure one of the chemical manufacturers was going to take it,” says James Bruno, president of the consulting firm Chemical and Pharmaceutical Solutions. “Two years ago, I would have thought one of the Chinese groups would have come in and done something with it.”

Bruno says Bain may invest in technology upgrades and will move to reduce costs. “And I think they are going to probably try to take advantage of the re-shoring trend, putting investments into making intermediates and raw materials.”

Bruno questions the logic of selling Delmar, however. “I would have kept this group,” he says. “It was a good way to get projects into the company” that originate from North American biotech firms. Bruno says that Minakem, with two plants in France and one in Belgium, has been on the lookout for a North American facility.