Max Life Insurance-HDFC Standard merger seeks CCI approval

Taking one step closer for being one of the largest insurance amalgamation, the Max Life Insurance and HDFC Standard Life Insurance merger now seeks the Competition Commission of India (CCI) approval.

Max India said in a statement today,"The company has filed a joint application along with the aforesaid parties to the scheme with the CCI of India, seeking its approval."

In a meeting held on August 8, the board of directors of HDFC Standard Life Insurance Company(“HDFC Life”), Max Life Insurance Company (“Max Life”), Max Financial Services (“Max Financial Services”) and Max India (“Max India”), approved entering into definitive agreements for amalgamation of business between the entities through a composite Scheme of Arrangement.

As a part of the proposed transaction, the life insurance business of Max Financial Services, currently held in Max Life, would demerge into HDFC Life.

While the relative valuation and exchange ratio of HDFC Life and Max Life would be 69% and 31% respectively.

For the merger of Max Life into Max Financial Services, shareholders of Max Life will get one share of Max Financial Services for approximately five shares of Max Life. For the 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.

The merged insurance entity will be paying a non-compete fee to the promoter group of Max Financial Services. The term of non-compete would be 4 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.

Also HDFC Life also bagged a trademark license agreement, where it will be entitled to use the ‘Max’ brand as part of life products that will transition from Max Life, for seven years post completion of the proposed transaction.

The proposed transaction is expected to create a Rs 255 billion annual premium company differentiated portfolio and wider reach to expand in a growing life insurance sector.