HDFC Life and Max Life Merger Deal
HDFC Chairman Deepak Parekh and Max Life Chairman Analjit Singh announced a merger deal to create India's Largest listed life insurance company with the estimated market value of Rs 67,000 Crore.
The max life promoter group will be paid a non-compete fees of Rs 850 Crore. On Monday, the boards of HDFC life, Max life and Max Financial Services approved this deal.
The proposed transaction will also required the approval by a majority of availabe shreholders and also voting at court-convened shareholder meetings of each and every of HDFC Life Insurance, Max Life Insurance and also Max Financial Services Ltd and Max India.
Chairman of HDFC said that, “I would like to say that Analjit Singh will continue to be a supportive shareholder of the merged entity along with other shareholders of merged entity. We all will work towards objective of making the merged company a bestcompany and more successful company.”
The lead financial adviser to this merger deal was Arpwood Capital. On Monday HDFC Life Insurance said that, “As per the agreed valuation and exchange ratio, the relative valuation of HDFC Life Insurance and Max Life Insurance would be 69% and 31%”.
Using merger process, Max Life Insurance will first joint with Max Financial Services Limited and in the next stage, the insurance unit will be demerged from the entiy into HDFC Life Insurance. After that the non-compete businesses for Max Financial Services Limited will joint into the group company Max Life.
Final Shareholding Structure:
HDFC : 42.5%
Standard Life: 24.1%
Mitsui Sumitomo: 7.8%
Max Financial Promoters: 6.5%
This deal entity on pro-forma has also add market share of 10.8% in an extremely competitive life insurance market in India.
Haitong’s Singh said that, there are two benefits to this merger deal. One of the benefit of this merger deal is that, it will be able to save costs as the all expense ratio also improves. And Second benefits of this deal is that, the expanded distribution network will allow them to grow faster.
Haitong’s Singh also said that, “The growth rate of the company will have an upside Delta of about 2-3 percentage points, which means if the two companies are growing at around 10% annually right now, the merged entity can grow at 12-13% every year”.