Source: Agencies09 Aug 2016 16:32:14
Mumbai, August 9: The boards of HDFC Life and Max Life had given their final approval on Tuesday to the merger between their respective life insurance entities. HDFC Life after merger can be said as the biggest player of Insurance sector. 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 deal is massive in every sense of the word as it will create an entity of Rs 25,000 crore, with an asset base of over Rs 1 lakh crore, and valued at Rs 67,000 crore. 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 will get 2.33 shares of HDFC Life for each share of Max Financial Services.
The term of non-compete clause will be four years since the payment of an upfront fee of Rs 501 crore which will be payable post completion of the proposed transaction. This will be followed by three equal annual installments totaling Rs 349 crore, taking the total fee to Rs 850 crore. HDFC Life has also entered into a trademark license agreement to use the Max brand as part of life products that will transition from Max Life, for seven years post merger.
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. Parekh further said "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 percent with an AUM of Rs 1.10 trillion." After this merger, HDFC will be listed on BSE and NSE.