Fairfax India to sell Fairchem Organics stake

A transaction may value the publicly listed company at a 25-30% premium to its market capitalization, one of the three people said, adding Fairfax has hired Bank of America (BofA) as an adviser for the deal.

Global companies in the flavours and fragrances segment, such as Europe-based Firmenich, Givaudan, Symrise and US-based IFF, could be interested in the deal, the second person added.

Ahmedabad-based Fairchem Organics is a unit of Fairfax Financial Holdings Ltd, the sponsor of its public investment firm Fairfax India Holdings Corp. Fairfax India Holdings, through its investment vehicle FIH Mauritius Investments Ltd, owned about 52.83% stake in Fairchem Organics Ltd as of June end.

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Shares of Fairchem Organics rose 1.62% on BSE on Thursday to close at ₹2,001.45. It touched its 52-week low on 19 May at ₹1,197.95.

The company, incorporated in 2019, manufactures aroma chemicals, nutraceuticals and oleochemicals, among others.

In November 2015, Fairfax acquired a 45% stake in erstwhile listed Adi Finechem Ltd for $20 million. In July 2016, it agreed to buy a 51% stake in Privi Organics Ltd for about $55 million. As part of that deal, Privi Organics merged some of its businesses with Adi Finechem, and subsequently, Adi Finechem was renamed Fairchem Speciality Chemicals Ltd.

In May 2019, Fairchem Speciality announced a restructuring exercise to merge the wholly owned unit Privi Organics India with itself, renaming the merged entity, which housed aroma chemicals businesses, as Privi Speciality Chemicals Ltd and creating a new subsidiary called Fairchem Organics Ltd.

The rejig involved multi-layered transactions and triggered a mandatory open offer. Last year, Fairfax decided to sell its 48.8% shareholding in Privi Speciality Chemicals Ltd to entities affiliated with Mahesh P. Babani and D.B. Rao for ₹1,220 crore.

Under its nutraceuticals division, Fairchem Organics currently produces (natural) mixed tocopherol and sterol concentrates used to make high-purity mixed tocopherols, natural vitamin E and Cortico steroids and exports them to the nutraceutical and health care industries.

Fairchem is also considered to be one of the reputed manufacturers of fatty acids from natural oils and fats derived from renewable raw materials such as soya, sunflower, corn, rice bran, etc.

The company has a manufacturing unit in the Sanand district of Ahmedabad with a plant capacity throughput of raw materials at 72,000 tonnes per annum.

In the broader speciality chemicals category, a few deals have closed in the recent past.

Azelis, a speciality chemicals and ingredients maker, acquired a majority stake in aromachemical distributor Ashapura Aromas Pvt. Ltd in June.

In a similar deal, pharma company Aceto acquired a majority stake in Finar Ltd in May 2021. The Ahmedabad-based company is a manufacturer, supplier and distributor of pharmaceutical excipients, lab chemicals, aquaculture inputs, and food-grade additives.

In December 2021, life science ingredients distributor Barentz International bought a majority stake in the distribution activities of Mumbai-based Gangwal Chemicals Pvt. Ltd. In 2020, IMCD, a distributor of speciality chemicals and ingredients, acquired a 70% stake in Signet Excipients Pvt. Ltd, with the remaining shares to be bought in 2024. This transaction largely aimed to strengthen IMCD’s presence in India and APAC region.

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