HDFC Life to merge Max Life, Analjit Singh to pocket Rs 850cr

Mumbai, Signalling more consolidation in the cluttered life insurance space, HDFC and Max groups today decided to merge their life insurance businesses to create the biggest private life insurer with combine asset base of Rs 1.1 lakh crore in a complex multi-stage share swap deal. 

Under the merger deal, the Max Group will also get an Rs 850 crore non-compete fee for not entering the life insurance business for the next four years. 

The boards of HDFC Life, Max Life, Max Financial Services and Max India today decided to amalgamate their businesses to create a Rs 25,500-crore entity under the label of HDFC Life through a 3:7 share swap under which a Max shareholder will get three HDFC Life shares for every seven in an old share deal.

The merger will make HDFC Life the largest private sector life insurer with close to 10.8 per cent (up from 6.5 per cent now and Max life has 4.3 per cent) and with an AUM of Rs 1.10 trillion, replacing ICICI Prudential which currently is the largest private sector player.

HDFC chairman Deepak Parekh said post-merger, HDFC Life will become a publicly traded company and he expects to complete the merger process over the next 12 months. 

"We will proceed with the regulatory filings and I expect the merger to close in 12 months. The merger will make our consolidated market share 10.8 per cent with an AUM of Rs 1.10 trillion," Parekh said.

The merged entity will command a valuation of over Rs 65,000 crore, HDFC Life managing director and chief executive Amitabh Chaudhary told reporters.

The merger is arrived at through a composite scheme of arrangement under which the life insurance business of Max Financial Services, currently held as Max Life, will be demerged into HDFC Life.

"As per the agreed valuation and exchange ratio, the relative valuation of HDFC Life and Max Life will be 69 per cent and 31 per cent respectively," the companies said.

Post merger, HDFC will hold 42.5 per cent in HDFC Life, Standard Life will continue to hold 24 per cent, Max Group will have 6.6 per cent stake in the company. Other shareholders, Axis Bank and PES will collectively own the rest of the shares.

Terming the deal as a long-term value creation for shareholders of HDFC Life, Parekh said Analjit Singh and his team have created a strong and robust team following a strategy of consistent and strong growth to create value for both shareholder and policy holders.

For the merger of Max Life into Max Financial Services, shareholders of Max Life will get one share of Max Financial Services for every 4.98 shares of Max Life. For demerger of the life insurance undertaking from Max Financial Services into HDFC Life, shareholders of Max Financial Services (post the amalgamation with Max Life), will get 2.33 shares of HDFC Life for each share of Max Financial  Services.

Earlier, HDFC and Max groups had entered into an "agreement to evaluate a potential combination through a merger of Max Life and Max Financial into HDFC Life through a scheme of arrangement". 

As per reports, insurance regulator IRDAI had expressed concerns over transfer of liabilities related to businesses other than life insurance to the merged entity, if Max Financial and Max Life were merged into HDFC Life in totality. (More)