Axis Bank, subsidiaries to acquire 19% stake in Max Life in revised deal

RBI did not consider Axis's earlier proposal of acquiring 17% stake in Max Life

The Axis Bank-Max Financial deal has run into trouble once again, as this time the Reserve Bank of India (RBI) did not consider the lender’s application to acquire 17 per cent equity share capital of Max Life Insurance. Instead, as per RBI’s advice, the deal has been revised, wherein Axis Bank and its subsidiaries–-Axis Capital and Axis Securities (Axis entities)-–have entered into revised agreements with Max Financial to acquire upto 19 per cent of the equity stake in Max Life.

The bank will only acquire 9 per cent of the equity share capital of Max Life Insurance, under the revised agreement and Axis entities will acquire a further 3 per cent of share capital of stake in Max Life. Furthermore, the Axis entities will have the right to acquire an additional 7 per cent stake in Max Life, in one or more tranches.

“The revised agreements will supersede the previous agreements entered into between the parties. The transaction is subject to conditions precedent, including regulatory approvals”, Axis Bank said in a statement to the exchanges.

In August, the parties had to revise their deal as the initial terms of agreement ran into regulatory hurdles. Initially, Axis Bank had intended to buy 29 per cent stake in the life insurance company. Post revising the deal, the bank had said it would buy 17 per cent stake in the company, resulting in owning 18 per cent in Max Life.

Earlier, the insurance regulator had raised concerns regarding a clause that was there in the initial agreement which would have allowed Axis Bank to swap the unlisted Max Life’s 30 per cent holding with the listed entity Max Financial Services, depending on the swap ratio, if the entity could not go for listing in five years. The initial deal was structured in a way wherein the long term intention was a merger of Max Financial Services with Max Life. Further, if even that was not possible, then Axis Bank would have a put option to sell its shares in Max Life at a pre-determined price to Max Financial.

In April, Axis Bank had said, it was looking to acquire an additional 29 per cent stake in Max Life Insurance for an estimated price of Rs 1,592 crore, raising its total holding in the life insurer to 30 per cent after the completion of the deal. Max Financial Services would have held the remaining 70 per cent in the joint venture.           

Timeline of the deal:

April: Axis Bank intended to acquire 29% stake in Max Life

June: Irdai raised concern regarding a clause in the initial deal

RBI also raise concern on the deal

August: Axis Bank alters deal; to buy 17% stake in Max Life

October: RBI does not consider the revised deal

Axis again revises deal; Axis Bank & its subsidiaries to buy 19% stake in Max Life, upon RBI’s advice