Private lender Axis Bank on Monday said it proposes to acquire 17% of the equity share capital of Max Life Insurance.
This will result in total ownership of 18% post the transaction, the lender told stock exchanges in a filing.
“We would like to inform you that following recent developments, Axis Bank now proposes to acquire 17.002% of the equity share capital of Max Life, resulting in total ownership of 18.0% post the transaction. The parties have executed the definitive agreements. Axis Bank and Max Life will shortly approach the respective regulatory authorities, with revised applications for their consideration and approval. The transaction is subject to regulatory approvals,” the bank said in its stock exchange filing.
In July, Axis Bank and Max Financial Services said they will make changes to certain options that were agreed upon earlier this year for the lender to hike stake in Max Life Insurance, following correspondence from regulator Irdai, according to a filing.
As per the definitive agreements entered into by the two companies, they had agreed to “certain Value Creation Options and related rights”.
In April, Axis Bank agreed to increase its stake in Max Life Insurance, a subsidiary of Max Financial Services (MFS), to 30% from about 1%.
In April, MFS had said the company and Axis Bank intend to create long term value for all shareholders of Max Life by working towards a merger of the company with Max Life.
“Should the merger not be completed by a pre-agreed timeline, the parties have contractually agreed on certain other outcomes which are detailed in the transaction documents including a swap up Axis bank’s shareholding to Max Financial, tax consequence of which will be equally borne by the parties,” MFS had said in a regulatory filing and also described them as ‘Value Creation Options’.
At that time, the company had also said that if the Value Creation Options are not consummated within 63 months from the closing, the transactions provide for a put option for the bank.
The bank would have the put option on the “company to sell all shares held by Axis Bank in Max Life at a price of ₹294 per share (subject to adjustments mutually agreed between parties) within 9 months of exercise of such put option,” the filing had said.
“Customary rights like minority protection rights for Axis Bank at Max Life level, anti-dilutive provisions, consequences of identified events of default form a part of the inter-se agreements,” it had said.
In June, the Insurance Regulatory and Development Authority of India (Irdai) raised concerns over four clauses in the merger agreement—a put option for Axis Bank to sell its stake; a possible merger of Max Life with its parent; placing an ‘observer’ in the Max Life board; and rights for one of the two companies to appoint auditors in Max Life.
The Axis-Max JV is expected to help Max Life’s distribution, like rivals SBI Life Insurance, ICICI Prudential Life Insurance and HDFC Life Insurance, all of which have either banks or NBFCs as JV partners.
