In an all-cash deal, Axis Bank,third largest private bank,has decided to further enlarge its stake in Max Life Insurance(Max Life) by buying additional 29 per cent in the life insurer and announced the signing of definitive agreements Analjit Singh's Max Financial Services(MFS) that holds 72.5 per cent stake in Max Life to become joint venture partners in the fourth largest private life insurer.
Axis Bank will acquier 55,64,94,102 shares representing 29 per cent stake in Max Life Insurance.Post completion of the series of transactions which is being planned to be completed in next six to nine months, Max Life will become a 70:30 joint-venture between MFS and Axis Bank.
Axis Bank currently also has a minor stake of around one per cent in the life insurer and is a large bancassurance partner of the company.Apart from MFS, Mitsui Sumitomo Insurance (MSI) currently owns 25.5 per cent stake in Max Life.The transaction with Axis Bank follows the ongoing swapping by MSI of 20.6 per cent stake that it holds in Max Life with a 21.9 per cent stake in MFS. MFS also plans to purchase MSI’s balance five per cent stake in Max Life at Rs 840 crore.
Axis Bank bank has long been looking to have a footprint in the country's life insurance industry as its other two other competitors,HDFC Bank and ICICI Bank have already their own life insurance companies
“We wish to inform you that the Board of Directors at its meeting held on Monday, 27th April 2020, has approved entering into an agreement with Max Financial Services Limited (MFSL) to acquire 29 per cent stake in Max Life Insurance Company Limited. The bank will acquire shares from Max Financial Services and will sign a Shareholders’ Agreement and a Share Purchase Agreement in relation to the same. The said transaction is subject to satisfaction of conditions precedent, including receipt of regulatory approvals from Reserve Bank of India, Insurance Regulatory and Development Authority of India and Competition Commission of India, among others,'' said Axis Bank in a notice to BSE.
Shares will be acquired from the listed parent entity of the target company i.e. from, MFSL. The promoter/ promoter group/ group companies do not have any interest in the entity being acquired, explained Axia Bank notice to the BSE.
If the value creation options are not consummated within 63 months from the closing, the transactions provide for a put option for Axis Bank on the company to sell a shares held by Axis Bank in Max Life at a price of Rs 294 per share (subject to adjustments mutually agreed between
parties) within 9 months of exercise of such put option.
Axis Bank is the and Max Life is the insurer in India
Max Life’s tag line will include Axis Bank’s name, which will further enhance customer trust in the brand and highlight the strength of the partnership.
The Boards of Axis Bank, MFS and Max Life approved the transaction late on 27th April. This is an outcome of the inter-se discussions after the three companies had signed a confidentiality and exclusivity arrangement on 20th Feb 2020 to explore the possibility of a long-term strategic partnership between Axis Bank and Max Life.
Upon the closing of the transaction, Axis Bank will have the right to nominate 3 (three) directors and MFSL will have the right to nominate 4 (four) directors on the Max Life Board. One nominee director of the promoter group on the Board of MFSL shall be a person identified by the Axis Bank.
Amitabh Chaudhry, MD and CEO, Axis Bank, said, “We see this joint venture creating immense value for our stakeholders given our long standing, high performing partnership with Max Life. We believe this transaction will allow us to deepen our working relationship leading to better integrated teams and infrastructure and a superior alignment in our approach.”
Analjit Singh, founder and chairman, Max Group, said, “I believe that in Axis, we have found an exceptional partner and we have conviction that this will make Max Life fundamentally stronger, better performing and will bring stability to the franchise. We will run the organization as if it’s an equal partnership, a philosophy which has held us in good stead earlier as well.”
The development will result in a mutually beneficial and enduring relationship between Axis Bank and Max Life and bring the stability of a long term partnership to India’s fourth largest private life insurance franchise. The joint venture arrangement will significantly improve Max Life’s competitive position vis a vis its competitors,including the other large bank owned private life insurers.
The two companies have had a successful business relationship for over a decade, providing long term saving and protection products to over 19 lakh customers. The total premium generated through this relationship has aggregated to over Rs.38,000 crore. Both companies have invested extensively in product and need-based sales training, thereby leading to consistent increase in productivity.
Axis Capital acted as the sole advisor to Axis Bank for this transactio.