Mumbai/Chennai, June 17 n one of the biggest consolidations to happen in the Indian life insurance sector, Max Life Insurance and Max Financial Services have signed agreements to evaluate a potential merger with HDFC Standard Life Insurance Company Ltd, officials said on Friday.
Explaining the proposed deal to the media in Mumbai, Analjit Singh, founder of the Max Group said: "First Max Life Insurance will merge with Max Financial Services-a listed entity. Then Max Financial Services will be merged with HDFC Standard Life which ultimately will become a listed company."
"We expect to finalise the swap ratio in 60 days. The whole merger process is expected to be completed in 12 months time," Deepak Parekh, Chairman, Housing Development Finance Corporation Ltd (HDFC) added.
Agreeing that the shareholding is a bit complex, Parekh also said the foreign partners in the two life insurance companies -- Standard Life, UK in HDFC Life and Sumitomo Mitsui, Japan in Max Life- are part of proposed deal as they are on the boards of respective companies.
The officials said there will be no cash involved in the proposed merger deal as the consideration will be settled by share swap ratio.
Singh and Parekh said the product portfolio of the merged entity will be well diversified.
According to Singh, Max Life has a strong individual agents force whereas HDFC Life has a strong bancassurance channel.
With HDFC Bank and other banks as bancassurance partners for HDFC Life and Axis Bank as a major distribution partner for Max Life, the proposed combined entity will have a strong bancassurance channel, added Parekh.
Parekh hoped the agents of Max Life would continue and bring in business for the merged entity.
When asked about the impact of the merger on the policyholders, employees of both the companies, Parekh said those issues would be looked into latter and are yet to be decided.
Queried about the 4.9 per cent stakes held by Axis Bank in Max Life Singh said they would continue to be as shareholder and would get their share once the swap ratio is decided.
Earlier in the day in a regulatory filing in the BSE HDFC said the Board of Directors of HDFC Standard Life Insurance at a meeting on June 17, 2016, has approved entering into a confidentiality, exclusivity and standstill agreement to evaluate a proposal for a potential combination through a merger of Max Life and Max Financial Services with HDFC Life by way of a scheme of arrangement.
The proposed arrangements would be subject to due diligence, definitive documentation and applicable board, shareholder, regulatory, respective High Courts and other approvals.
HDFC Standard Life is a joint venture between HDFC with 61.63 per cent stake, Standard Life (Mauritius Holdings) 2006 Ltd with 35 per cent stake and the rest by others.
Earlier this month, HDFC had announced that its general insurance company HDFC ERGO General Insurance's board had approved the acquisition of L&T General Insurance Company for Rs 551 crore.
The non-life merger is not complicated like the life insurance companies, said Parekh.
Meanwhile, the Max Financial Services scrip on BSE gained Rs 44.10 on Friday to close at Rs 427.80