Max Financial Services and #MaxLife will merger with #HDFC Life, boards approve

#Bengaluru : Max Financial Services and Max Life will merge with HDFC Life insurance, the companies said in statements to exchanges on Friday. Max Financial Services and HDFC said that their respective boards have approved entering into a confidentiality, exclusivity and standstill agreement to evaluate a potential combination through a merger.

However, neither side disclosed how much stake the foreign partner of Max Life would hold after the merger. No timeline has been given for the merger, either.

The agreement provides for a mutually agreed exclusivity period for due diligence and discussions between the parties in relation to a proposed transaction.

Ashvin Parekh, managing partner of Ashvin Parekh Advisory Services said that the time is ripe in the insurance sector and that those companies with heavy cash would be active in these deals in the future.

Insurance sector experts said that consolidation in the insurance sector in India which currently has 24 life insurers and 29 general insurers would eventually see large players merging with one another to balance out each other strengths, as well some smaller players getting merged with larger entities. With Max and HDFC Life boards agreeing to evaluate the merger, many more such deals are expected, experts said.

A senior insurance consultant pointed out that there could be more such entities in the insurance sector which could be heading for a merger. “Smaller insurers where promoters are cash strapped or thsoe who do not have any bank partner will be likely candidates,” he said. This would be the second such merger being announced this month after the recent announcement of L&T General merging with HDFC ERGO General Insurance.

HDFC Life which is the third largest private life insurance company with respect to new premiums for FY16 collected premiums of Rs 6487.66 crore for the year ended March 31, 2016. It saw a growth of 18 per cent, according to data from Insurance Regulatory and Development Authority of India. Max Life on the other hand collected premiums of Rs 2881.93 crore for FY16 and is among the top five private life insurance players.

Earlier, in March 2013, L&T, Kishore Biyani’s Future Group and Generali Group had signed a non-binding term sheet for the merger of L&T General Insurance and Future Generali India Insurance. This was a first-of-a-kind proposed in the sector. L&T was to hold 51 per cent stake, Generali Group 26 per cent and 23 per cent by Future Group. However, in April 2014, L&T General and Future Generali India said they were calling off the venture, due to ‘inordinate delay’ in finalising a transaction. By Agencies.