Fairfax controlled Adi Finechem and Privi Organics to form specialty chemicals JV

Adi Finechem Limited (a speciality oleo and nutraceutical products manufacturing company) and Privi Organics (the Mumbai-based aroma chemicals manufacturer) – two companies in which Canadian investment holding company Fairfax India Holdings Corporation holds controlling stake – have agreed to set up a joint venture firm focusing on value-added speciality chemicals using renewable waste as raw materials (or feedstocks).

“The boards of directors of Adi Finechem Limited and Privi Organics have approved a scheme of arrangement involving the two companies to build an Indian speciality chemicals firm, with both companies converting renewable waste feedstocks into value-added speciality chemicals,” said Fairfax India in a press statement.

While Fairfax India announced acquisition of 51 percent stake in Privi Organics for Rs 370 crores (approximately $55 million) yesterday, it had acquired 45 percent stake in Adi Finechem Limited in the first quarter of 2016.

After the scheme is effective, Fairfax India would own approximately 49 percent in the merged business which the parties propose to rename Fairchem Speciality Limited (Fairchem). The proposed scheme is subject to customary regulatory approvals including a court approval process and is expected to close in first quarter of 2017. Adi Finechem and Privi Organics would continue to operate as distinct and independent business units of Fairchem.

“We are excited to partner with great entrepreneurs who have shown commitment to building great businesses over the long term. Mahesh Babani, D B 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,” said Prem Watsa, chairman of Fairfax India.

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.

“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,” opined Utkarsh Shah, chairman of Adi Finechem.

Nahoosh Jariwala, managing director of Adi Finechem, said, "Privi Organics is a well-managed company created on the back bone of research and development in the field of aroma chemistry. Adi Finechem will immensely benefit from the depth of experience and expertise of Privi Organics' management team."

Mahesh Babani, managing director of Privi Organics, added, “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.” 

He 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.