The Board of Directors of Fairchem Speciality Limited announced the separation of its “Oleo Chemical & Nutraceutical Business” through a demerger. To take the company to the next level, the famous Fairfax group acquired a significant stake in the company & thereafter immediately the company acquired “Aroma Business” from Privi Organics Limited. As a result of the acquisition by Fairfax & demerger, the erstwhile promoters stake got changed from 62% to 4%.  Interestingly, only after less than three years, the promoters have decided to part away. What made them think of separation of the business? What will be the impact on minority shareholder and the largest promoter shareholder Fairfax Group?

Formation of FAIRCHEM SPECIALTY LTD.

Till 2015-16, the company was operated as Adi Fairchem Limited (AFL) having a business of speciality oleo chemical & nutraceuticals. In late 2015, Canada based Fairfax Group (FIH) entered into a Share Purchase Agreement with existing Promoters (Adi Promoters) to acquire 44.66% equity stake in the company at a price of Rs 212 per equity share. As a result of this, Adi Promoters received circa Rs 131 crores.

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FIH also came with an open offer, however, it got a poor response from the public shareholder and only 847 equity shares were accepted by the FIH. With an introduction of Fairfax, the name of the company got changed to its current name.

Previous Demerger Transaction and Changes in Shareholding.

As in the figure above, Fairfax (FIH) enters the promoters group of AFL in 2015 and of Privi Organics Ltd. (POL) in 2016.

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In 2016, FSL announced acquisition of “Aroma Chemical Business” of Privi Organics Limited(“POL”) (then unrelated company) through demerger into a wholly-owned subsidiary of ADI Finechem – ADI Aromatics Ltd.  For considerations, shareholders of POL, Privi Promoter Block (Babani & Rao family) and others were issued equity shares and compulsory convertible preference shares (CCPS). These CCPS were converted into equity shares in subsequent year 2017 and 2018.

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After de-merger, few of the existing promoter shareholders were classified as a public shareholder hence Adi Promotor Block shareholding came down to 4.12%. With the de-merger of “Aroma Chemical Business”, both Mr. Babani & Mr. Rao joined the board of directors of the company, with Mr. Babani in the role of Managing Director. Further, the composition of the board got changed significantly after the de-merger.

ADI Aromatic Ltd was later renamed to Privi Organics India Ltd (POIL). Also FIH exited from the POL post demerger by selling the share back the Privi Promoters. Currently, there is marginal business of trading inorganic chemicals present in POL.

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Current Transaction

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