Max Life, Max Financial Services to merge into HDFC Standard Life

 Max Financial Services and Max Life Insurance have decided to merge into HDFC Standard Life Insurance Company. The deal, which is subject to approvals, will create the second largest insurance company in the country after state-owned LIC.

 “The board of directors at its meeting held on June 17, 2016, approved entering into a confidentiality, exclusivity and standstill agreement to evaluate a potential combination through a merger of Max Life Insurance Company and Max Financial Services into HDFC Standard Life Insurance Company by way of a scheme of arrangement. The agreement provides for a mutually agreed exclusivity period for due diligence and discussions between the parties in relation to the proposed transaction,” Max Financial Services said.
 The proposed arrangements would be subject to due diligence, definitive documentation and applicable board, shareholder, regulatory, respective High Courts/NCLT, and other third party approvals, as may be applicable, Max Financial Services added.

 HDFC, the parent company of HDFC Standard Life, also confirmed about the merger talks in a seperate statement to the exchanges. Max Life is a joint venture between Max Financial Services and Mitsui Sumitomo Insurance Company. The total premiums for the company for the year ending March 31, 2016 was Rs 9,216 crore and total assets under management (AUM) as of March 31, 2016, was Rs 35,824 crore. HDFC Life’s total premiums for the year ending March 31, 2016 were Rs 16,313 crore and total AUM as of March 31, 2016 was Rs 74,247 crore.

“Macro economic conditions were conducive for consolidation in insurance space. We expect valuation for the companies and the deal to be decided in 60 days, and do not foresee need for a open offer in Max Life due to the merger,” HDFC chairman Deepak Parekh said.

Mitsui Sumitomo Insurance and Standard Life were aware and have agreed to the merger and we hope to complete the merger within 12 months, Parekh added. According to Analjit Singh of Max Group, there would be no seperate listing of HDFC Life. “Max Life will be merged into Max Financial Services (a listed entity) which would then be merged into HDFC Life,” Max group founder Singh said.

The swap ratio, ownership structure of new entity will be decided after merger, Singh added.