“Max Financial Services Limited has informed the Exchange that the Board of Directors of Max Financial Services Limited at its Board meeting held on June 17, 2016, approved entering into a confidentiality, exclusivity and standstill agreement to evaluate a potential combination through a merger of Max Life Insurance Company Limited and Max Financial Services Limited into HDFC Standard Life Insurance Company Limited by way of a scheme of arrangement,” the company said in a notice to the stock exchanges.
“The agreement provides for a mutually agreed exclusivity period for due diligence and discussions between the parties in relation to the proposed transaction,” it added.
HDFC, in a separate statement to the exchanges, confirmed that it was entering exclusive talks for a possible merger.
No details were provided on the time frame over which the final contours of a deal would be announced. The HDFC board is also scheduled to meet in Mumbai to discuss the issue, said a person familiar with the plan.
The confirmation of merger talks comes hours after it was reported that HDFC Standard Life and Max Financial are discussing the option of a merger. On Friday morning, The Economic Times first reported that the merger talks are being led by Deepak Parekh, chairman of Housing Development Finance Corporation Ltd (HDFC), and Analjit Singh, founder of the Max Group.
The deal, if concluded, will create the largest private insurance company in the country. It will overtake ICICI Prudential, which is currently the largest private insurer.
HDFC Life has been preparing to go public. In April, the board of HDFC approved a proposal to sell shares in HDFC Life through an initial public offering. “The plan is to do this divestment in the second part of the calendar year,” Keki Mistry, vice-chairman and chief executive officer of HDFC, told Mint after the board decision on 20 April.
HDFC intends to sell up to 10% stake in HDFC Life through the IPO.
At 12.02pm, Max Financial Services Ltd shares were trading at Rs 483.75 on the BSE, up 13% from previous close, while India’s benchmark Sensex Index rose 0.45% to 26644.99 points. HDFC shares rose 1.6% to Rs 1,219.95.