Max-HDFC Life Merger Clears Key Hurdle

Minority shareholders of Max Financial Services today cleared a proposal to pay Rs 850-crore non-compete fee to Analjit Singh and other promoters of the Max group, paving the way for the merger of HDFC Standard Life Insurance Company and Max Life Insurance Company.

The non-compete fee to be paid over four years is a prerequisite for the merger.Singh and the other promoters will receive Rs 349 crore in three equal instalments, besides an initial payment of Rs 501 crore after the completion of the merger. Proxy advisory firms did not support the proposal, with a few of them asking shareholders to vote against the proposal.

Around 65% of the votes polled, that is 9.05 crore votes, including 6.36 crore e-votes, were in favour of the proposal. A little over 4.94 crore votes, or 35.32%, were against the resolution, Max Financial Services told the bourses today. The process will first see Max Life merging into Max Financial Services, the parent of Max Life. Thereafter, the life insurance undertaking will be demerged from Max Financial Services into HDFC Life, which will be the merged insurance entity.Subsequently, Max Financial Services (holding the residual business) will be merged into Max India.After this, HDFC Life will become a listed company. It will have HDFC and Standard Life as promoters. While HDFC will hold around 42.5% in the merged entity, Standard Life's shareholding will be 24%. The proposed transaction is expected to become effective in the next 12-15 months.

Shareholders of Max Life will get one share of Max Financial Services for every five shares they hold on account of the merger. For demerging from Max Financial Services into HDFC Life, shareholders of Max Financial Services will get 2.33 shares of HDFC Life for each share.

In a separate polling, shareholders of Max India approved a resolution, which entailed the merger of Max Financial Services (holding the residual business) into the company of the total votes polled, little over 93% were in favour. In August, the boards of HDFC Life and Max Life along with two other companies finalised the merger of the two insurers.Total premium of the merged entity is expected to be nearly Rs 26,000 crore and assets under management will top Rs 1 lakh crore.In the private life insurance segment, only ICICI Prudential Life Insurance has reported assets under management of Rs 1 lakh crore. The shares of Max Financial Services today finished at Rs 551, down 2.17% from its previous close on the BSE.