Under the three-step process, Max Life will first merge with its parent Max Financial Services Ltd. Second, the insurance unit will be demerged from this amalgamated entity into HDFC Life. Then, the non-insurance businesses of Max Financial will merge into group company Max India Ltd.
The boards of all four firms approved the terms, the companies said in a joint statement.
The deal envisages shareholders of Max Life getting one share of Max Financial for every 4.98 shares of Max Life. In the second step, shareholders of Max Financial (post the amalgamation with Max Life) will get 2.33 shares of HDFC Life for each share they hold, the statement said.
Moreover, promoters of Max Life, essentially Analjit Singh and his family and related firms, will get Rs.850 crore as a non-compete fee from the merged entity. Of this Rs.501 crore will be paid upfront and Rs.349 crore will follow later in three equal annual instalments.
Housing Development Finance Corp. Ltd and Standard Life (Mauritius Holdings) will be the promoters of the merged entity, which will be named HDFC Life.
HDFC will cease to be the holding company of HDFC Life post the merger and will hold around 42.5% of the merged entity, the joint statement said.
This article was first published on Livemint.com