Fairfax India Holdings Corporation is to acquire 51 per cent equity in Privi Organics, for Rs 370 crore ($55 million).
It has entered into a share subscription agreement with Privi Organics and a share purchase agreement with existing shareholders. The transaction is subject to customary closing conditions and is expected to conclude in the third quarter of 2016.
Additionally, the boards of directors of Adi Finechem and Privi Organics have approved a scheme involving the two to build an Indian speciality chemicals entity, with both companies
converting renewable waste feedstock into value-added speciality chemicals.
“The proposed scheme will bring significant diversification and synergies to both partners, with Adi Finechem gaining access to high quality research and development facilities, and Privi Organics benefiting from Adi Finechem’s focus on cost optimisation and capital efficiency,” said Fairfax.
Fairfax India had acquired 44.9 per cent in Adi Finechem in the first quarter of 2016. After the scheme is effective, Fairfax India would own approximately 49 per cent in the merged business, which the parties propose to rename Fairchem Speciality Ltd (Fairchem). The proposed scheme is subject to customary regulatory approvals, including a court approval process, and is expected to close in the first quarter of 2017. Adi and Privi would continue to operate as distinct and independent business units of Fairchem.
It may be noted, in April Fairfax India Holdings, part of Canadian billionaire Prem Watsa's Fairfax Holdings, said it would invest $300 million in privately held and Chennai-based petrochemical company Sanmar Chemicals Group through a combination of equity and fixed-income securities.
On Privi Organics investment, Prem Watsa, Chairman of Fairfax India in a statement said: "We are excited to partner with great entrepreneurs who have shown commitment to building great businesses over the long term. Mahesh Babani, DB Rao and their experienced management team have done a commendable job in building Privi Organics into a global leader in their product segments and will continue to grow its operations independently under their leadership."
Utkarsh Shah, Chairman of Adi Finechem, said: "Privi Organics is a key supplier of aroma chemicals to many large fragrance and FMCG companies
globally. Post merger, Fairchem, the resulting listed company, will be one of India's largest speciality chemicals company and well positioned for growth and profitability."
Mahesh Babani, Managing Director of Privi Organics, said: "We are delighted to partner with Fairfax India as a committed long term investor and Adi Finechem, a leader in the field of speciality chemicals for the adhesive and nutraceutical industries. We see a strong alignment of values and interests of all stakeholders in this partnership." Babani also emphasised that with strong financial support and commitment from Fairfax India, Privi's biotechnology initiatives in collaboration with Institute of Chemical Technology, Mumbai, can scale greater heights.