Private equity firm True North is set to acquire a 51% stake in Max Bupa Health Insurance Company from Max India in an all-cash transaction that will lead to a cash inflow of Rs 511 crore to Max India, according to an exchange notification. True North will also additionally buy a 2.5% stake in the firm from Bupa that will take its total stake in the company to 53.5%, according to Divya Sehgal, partner at True North.

Max Bupa is a 51:49 joint venture between Max India and the UK-based Bupa Group.

“There will be a total of nine Board seats of which four will belong to True North, two of Bupa and three will be independent,” Sehgal said.
The transaction values Max Bupa at an enterprise value of Rs 1,001 crore. Max India said it intends to utilise the proceeds from the transaction to invest in both existing and new business opportunities which are under evaluation.

True North Fund VI, either directly or through its affiliates, will be acquiring the stake.

Bupa, the existing joint venture partner in Max Bupa, will continue to play an active role in the company as before through its Board positions and knowledge exchange initiatives.

At the conclusion of the transaction, True North will nominate directors on Max Bupa’s Board, while Max India’s nominated directors will step down, Max India stated. The use of the Max brand will be phased out over a period of two years and replaced with a suitable name. The Bupa brand name will continue as before.

The transaction is expected to get completed within fiscal year 2020, the firm said. The process of conclusion of Max Bupa’s divestment will run in parallel and independent of the recently announced composite transaction involving demerger of Max India and the merger of Max Healthcare with Radiant-KKR.

KPMG Corporate Finance acted as lead financial advisor to Max India in this bilateral transaction with True North.

Analjit Singh, founder and chairman, Max Group, said that the firm is rebalancing its portfolio of businesses with a much sharper focus on growing shareholder value. “We are proud of the high quality organisation we have created in Max Bupa, with its innovative product portfolio, balanced channel mix and its customer first orientation. We are sure that Max Bupa will continue its excellent performance under its new shareholders, ably supported by the founding JV partner Bupa,” he said.

For the fiscal year 2018 (FY18), the company had posted a net profit of Rs 22.84 crore compared to a loss of Rs 3.68 crore the year before. It had posted an underwriting loss of Rs 27.55 crore in FY18 compared to a loss of Rs5.42 crore in FY17.

Max India — the holding company of Max Bupa Health Insurance and Antara Senior Living and an equal joint venture partner in Max Healthcare — is focused on health and allied businesses. The company owns and manages a 49.7% per cent stake in Max Healthcare, a 51% stake in Max Bupa Health Insurance and a 100% stake in Antara Senior Living.

On Tuesday, shares of Max India ended the session 2.61% up on the Bombay Stock Exchange at Rs 82.50.