No merger: Max India pulls out of Max Life-HDFC Life deal

The biggest merger in the life insurance industry, between HDFC Standard Life and Max Life, was called off on Monday. In a statement to the exchanges, Max Life said the proposal had been called off and the exclusivity agreement with HDFC Life, which expired on July 31, would not be renewed. 

This paves the way for HDFC Standard Life’s initial public offer (IPO), which is expected by December, according to company executives. 

“The prospective partners evaluated several structures over the last month. However, the inordinate time associated with finalisation and approval of these structures led to this decision,” the statement said.

A merger of the country’s second and fourth biggest private life insurers would have created India’s second largest life insurance company after government-owned Life Insurance Corporation.

The merged entity would have had an asset base of Rs 1.1 lakh crore and 601 branches.  HDFC Standard Life executives said the companies would approach the Insurance Regulatory and Development Authority of India (Irdai) to withdraw their merger proposal. “After this, we will approach the Securities and Exchange Board of India to file our IPO prospectus,” an executive said. HDFC Standard Life expects to complete its IPO by December. 

“Given there are more than 20 players in the industry, we are scouting for companies we can acquire,” said a Max Life executive. 

The merger faced problems, with the Irdai refusing to approve the merger of a holding company with a life insurance company. 

The three-stage deal involved Max Life merging with Max Financial Services, which would, in turn, merge with HDFC Standard Life. The deal was designed so that HDFC Standard Life would be automatically listed because Max Financial Services was already listed. According to Section 35 of the Insurance Act, 1938, no life insurance business of an insurer can be transferred to any person, or be transferred to or amalgamated with the life insurance business of any other insurer, except in accordance with a scheme prepared under this section and approved by the Irdai. 

The Irdai had sought approval from the attorney-general for the deal. After the Irdai rejected the deal for the second time on June 9, the UK-based Standard Life had asked questioned the proposed merger. 

Standard Life, which holds a 35 per cent stake in HDFC Standard Life, had said it would push for listing its joint venture with HDFC at the earliest. 

“There can be no certainty that any options relating to the merger will be viable, in which case Standard Life intends to propose an IPO of HDFC Standard Life at the earliest possible opportunity,” Standard Life had said in a statement.

Shares of Max Financial Services, the holding company of Max Life, closed at Rs 609.05 on Monday, up 0.83 per cent.

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