Private sector lender Axis Bank on April 28 said it will acquire 29 percent stake in Max Life Insurance. With this acquisition, the total stake of Axis Bank in Max Life will be at 30 percent.
Max Financial Services currently holds a 72.5 percent stake in Max Life and Mitsui Sumitomo Insurance (MSI) owns 25.5 percent stake.
Prior to this transaction, Axis Bank held about 2 percent stake in Max Life Insurance. Once the transaction is completed, the bank will hold 30 percent stake.
"We wish to inform you that the Board of Directors at its meeting held on Monday, 27th April 2020, has approved entering into an agreement with Max Financial Services Limited (MFSL) to acquire 29 percent stake in Max Life Insurance Company Limited. The Bank will acquire shares from Max Financial Services and will sign a Shareholders’ Agreement and a Share Purchase Agreement in relation to the same," Axis Bank said in a release.
Moneycontrol had reported in February 2020 about Axis Bank planning to buy additional stake in Max Life as part of an exclusivity arrangement. Sources said the deal size could be roughly around Rs 1,700 crore.
This deal is an outcome of the discussions after Axis Bank, Max Financial and Max Life had signed a confidentiality and exclusivity arrangement on Feb 20, 2020 to explore the possibility of a long-term strategic partnership between Axis Bank and Max Life.
Post the deal, Max Life will be a 70-30 joint venture between Max Financial Services and Axis Bank.
This transaction with Axis Bank follows the ongoing swapping by MSI of 20.6 percent stake that it holds in Max Life with a 21.9 percent stake in MFS.
MFS also plans to purchase MSI’s balance stake in Max Life. The proposed transactions are subject to approval of requisite corporate and regulatory authorities including the Reserve Bank of India, Insurance Regulatory and Development Authority of India and Competition Commission of India.
Upon the closing of the transaction, Axis Bank will have the right to nominate three directors and Max Financial will have the right to nominate four directors on the Max Life Board. One nominee director of the promoter group on the Max Financial Services board will be a person identified by Axis Bank.
Axis Bank is the third largest private bank and Max Life is the fourth largest private life insurer in India. The two companies have had a successful business relationship for over a decade, providing long term saving and protection products to over 19 lakh customers. The total premium generated through this relationship has aggregated to over Rs. 38,000 crore.
Amitabh Chaudhry, MD and CEO, Axis Bank said, “We see this joint venture creating immense value for our stakeholders given our long standing, high performing partnership with Max Life. We believe this transaction will allow us to deepen our working relationship leading to better integrated teams and infrastructure and a superior alignment in our approach.”
Max Life will gain from its exclusive presence in Axis Bank’s 4,415 branches while the bank will be able to boost its fee income from this partnership.
Mohit Talwar, Vice Chairman, Max Group and Managing Director, Max Financial Services said that this joint venture has the potential to catapult Max Life further up on the life insurance league table.This is not the first time Max Financial Services is eyeing a partnership. In June 2016, Max Financial Services and HDFC Life had entered into an agreement for a merger. However, this was called off since they did not receive a regulatory approval.