Allianz, which had invested just Rs 174 crore in both the JVs way back in 2001 , is expected to start new insurance new companies in India soon either by partnering with another Indian company or with full ownership after the government allows 100 per cent FDI in the insurance sector.There are also market rumours Allianz joining hands with Mukesh Ambani’s Jio Financial Services to promote two insurance companies
Mumbai/Pune: Ending its 24 year old knotty joint ventures(JVs), Germany multinational Allianz SE has finally decided to exit both Bajaj Allianz General Insurance(BAGIC) and Bajaj Allianz Life insurance(BALIC) by selling its 26 per cent each in both the JVs for a total consideration of Rs 24,180 crore.
In one of the biggest deals, the agreed consideration for 26 per cent stake of Allianz in BAGIC and BALIC is Rs. 13,780 crore and Rs.10,400 crore respectively.
Once the existing JVs are terminated under the terms of the SPA, the Bajaj Group and Allianz aim to independently pursue their insurance strategies in India, said Bajaj Finserv.
“As the proceeds become available, Allianz will consider options for their deployment that support the company’s strategic ambitions, in particular the reinvestment of sale proceeds into potential new opportunities in India,” said Allianz
Allianz, which had invested just Rs 174 crore in both the JVs way back in 2001, is expected to start new insurance companies in India soon either by partnering with another local company or with a full ownership after the government allows 100 per cent FDI in insurance sector. There are also market rumours Allianz joining hands with Mukesh Ambani’s Jio Financial Services to promote two insurance companies
When the capital requirement for starting an insurance company has been always at Rs 100 crore, Allianz had invested Rs 74 crore for BAGIC and Rs 100 crore for BALIC for picking a stake of 26 per cent, as allowed in 2001, in both the JVs.
Sources, who were part of the JV agreement pointed out that Bajaj Group, which was entering the any financial services sector for the first time, had charged a huge premium for forming the partnership with Allianz.
Practically, Bajaj Group, headed by late Rahul Bajaj, had not invested anything towards the basic capital of Rs 100 crore when the JVs were formed in 2001.
Sources pointed that afterwards Allianz had made frequent efforts to increase its stakes in both the JVs(after the FDI limit was raised 49 per cent and 74 per cent over period of time by the government) but they couldn’t do it due to some technical reasons over pricing formula as mentioned in the original agreement.
Bajaj Finserv Ltd., the holding company of both the JVs on Monday signed Share Purchase Agreements (SPAs) for acquisition of Allianz’s 26 per cent in both the insurance comapnies.
The execution of the SPAs mark the culmination of constructive and amicable discussions to ensure a seamless transfer of the stake of Allianz.
The acquisition of Allianz SE’s stake will increase Bajaj Group’s ownership in BAGIC & BALIC to 100 per cent from the current 74 per cent.
The acquisition is subject to regulatory approvals, including approvals from the Competition Commission of India and the Insurance Regulatory and Development Authority of India.
Sanjiv Bajaj, chairman and managing director, Bajaj Finserv
The 24-year-old joint venture agreements between the Bajaj Group and Allianz SE in respect of insurance businesses will stand terminated upon the completion of the first tranche of acquisition of at least 6.1 per cent and reclassification of Allianz from being a promoter to investor.
Under the terms of the SPA, it is proposed that Bajaj Finserv Ltd. will acquire approximately 1.01 per cent , Bajaj Holdings and Investment Ltd. approximately 19.95 per cent and Jamnalal Sons Pvt. Ltd. approximately 5.04 per cent aggregating to 26 per cent in each of the insurance companies.
Post acquisition, BFS stake will be 75.01 per cent in both the companies.
Sanjiv Bajaj, chairman and managing director, Bajaj Finserv, said, “Together with Allianz, we have built two of the strongest insurance companies in India with a combined premium exceeding Rs. 40,000 crore, while maintaining industry-best solvency margins. The acquisition will become a big driver of value for our stakeholders in the years to come.”
Allianz and Bajaj are fully committed in ensuring a smooth transition in a manner that interests of policyholders, intermediaries and other stakeholders are least affected.
Bajaj Finserv and Allianz have also entered into agreements that will ensure continuity of reinsurance and other services during the transition.
Bajaj Finserv also acquire the entire equity stake held by Allianz in Bajaj Allianz Financial Distributors Limited (BAFDL) a 50:50 joint venture with for a consideration of Rs12.5 crore.