HDFC, Max Financial weaken after fixing swap ratio for merger of insurance business

HDFC was down 2% at Rs 1,340, while Max Financial Services was trading 1% lower at Rs 537 on the BSE at 01:40 pm.

Shares of Housing Development Finance Corporation (HDFC) and Max Financial Services were trading lower after the HDFC Life and Max Life Insurance announced a swap ratio for their merger. HDFC Life is a material subsidiary of the HDFC.

HDFC was down 2% at Rs 1,340, after hitting low of Rs 1,332 on the BSE in intra-day trade. Max Financial Services was trading 1% lower at Rs 537. The stock hit a low of Rs 515, after touching high of Rs 548 in early morning trade.

“As a part of the proposed transaction, the life insurance business of Max Financial, currently held through Max Life, would be finally amalgamated with HDFC Life and all other business of Max Financial would be finally amalgamated into Max India. The shares of HDFC Life are proposed to be listed on BSE Limited and the National Stock Exchange of India Limited as a consequence of the Scheme,” HDFC said in a statement.

The shareholding of the Corporation in HDFC Life post completion of the proposed transaction would be 42.5% and consequently HDFC Life would cease to be a subsidiary of the Corporation, it added.

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.

As part of this deal, Singh and his family will receive a non-compete fee of Rs 501 crore, payable after the transaction is completed. Singh will not be able to start a life insurance business for four years. The promoters will also receive three equal installments totaling Rs 349 crore. LINK