Analjit Singh-led promoter group of Max Financial Services will get ₹850 crore as non-compete fee following merger of its life insurance business with HDFC Standard Life Insurance Company Ltd (HDFC Life). The payment will be made by the merged entity over a four-year period, with an upfront fee of ₹501 crore followed by three equal annual instalments totalling ₹349 crore.
While the merger talks were earlier announced in June, the Board of Directors of HDFC Life, Max Life Insurance Company (Max Life), Max Financial Services and Max India at their respective meetings held on Monday, approved entering into definitive agreements for amalgamation of the businesses between the entities through a composite Scheme of Arrangement. Assets under management of the combined entity will touch ₹1.10-lakh crore and new premiums will touch almost ₹9,400 crore. ICICI Prudential Life is the current market leader among private life insurers with total assets under management of ₹1.04-lakh crore.
HDFC Life, the merged insurance entity, would become a listed company, with HDFC and Standard Life (Mauritius Holdings) as the promoters. The proposed transaction is expected to become effective in the next 12-15 months.
As part of the proposed transaction, the life insurance business of Max Financial Services, currently held in Max Life, will demerge into HDFC Life. According to the agreed valuation and exchange ratio, the relative valuation of HDFC Life and Max Life will be 69 per cent and 31 per cent, respectively. 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.