HDFC Life, Max Life agree on swap ratio, non-compete fee

Two private life insurers - HDFC Standard Life Insurance Company and Max Life Insurance Company Ltd - on Monday said they have agreed to sign definitive agreements for amalgamation of two companies.

The relative valuation of HDFC Standard Life and Max Life would be 69 per cent and 31 per cent respectively, said HDFC Standard Life in a statement.

The promoters of Max Financial Services will also paid a non-compete fee of Rs 850 crore.

The business of two companies will be merged through a composite scheme of arrangement involving three entities.

First Max Life will be merged into Max Financial Services. The 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 statement added.

According to HDFC Life, the merged life insurance company will pay a non-compete fee to the promoter group of Max Financial Services.

As per the agreement promoters of Max Financial Services shall not compete in the same business space for for years since the payment of an upfront non-compete fee of Rs 501 crore, to be paid on completion of the proposed merger transaction.

"This will be followed by three equal annual installments totaling Rs 349 crore," HDFC Life said.

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 completion of the proposed transaction.

Max Financial Services will seek an upfront approval of their public shareholders (greater than 50 per cent of the votes cast) for payment of the non-compete fee and Max Life will seek consent from its shareholders holding more than 75 per cent stake for the proposed transaction.

Separately, Max India will also seek an upfront approval of its public shareholders for the proposed transaction.

HDFC Ltd and Standard Life (Mauritius Holdings) 2006 Ltd will be the promoters of HDFC Life the merged entity, post completion of the proposed transaction.

Upon obtaining all approvals, when the scheme becomes effective, the following steps will occur in that order:

- Max Life will merge into Max Financial Services

- Demerger of the life insurance undertaking from Max Financial Services into HDFC Life (ie, the merged insurance entity)

- Merger of Max Financial Services (holding the residual business) into Max India.

The Board of Directors of the companies have approved the scheme of amalgamation.

--IANS

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