Max Financial, its arm, Mitsui terminate stake swap deals

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Published: November 7, 2019 4:44:14 AM

The share of Max Financial Services ended the day at Rs 438.45, gaining Rs 9.70 or 2.26% on BSE.

Max Financial, MLIC, Max Financial Services, Max Life Insurance, Irdai, share of Max Financial ServicesMax Financial had announced that MSI was to be issued 21.45% stake in MFS at Rs 421.67 per share through a preferential allotment.

Max Financial Services (MFS), its subsidiary Max Life Insurance Company (MLIC) and Mitsui Sumitomo Insurance Company (MSI) have mutually agreed to terminate the transaction which was announced in August this year. Max Financial had announced that MSI was to be issued 21.45% stake in MFS at Rs 421.67 per share through a preferential allotment. In exchange, MFS was to acquire 19.98% stake in Max Life from MSI at Rs 80.89 per share.

“MFS, MSI and MLIC could not reach an agreement for the finalisation of the definitive documents and have mutually agreed to terminate the transaction (including the proposed preferential allotment and the Term Sheet) and continue their existing joint venture arrangements with respect to MLIC,” said Max Financial Services in an exchange notification. The share of Max Financial Services ended the day at Rs 438.45, gaining Rs 9.70 or 2.26% on BSE.

Nomura in its note on August 7 had stated that the swap valuation was neutral for minority shareholders of MFSL. “Qualitatively, the current structure is cleaner in our view, as MFSL’s shareholding of Max life increases to approximatley 91.8% and factors in the potential for collapsing the current two-tier structure. That said, the uncertainty surrounding a distribution tie-up remains,” said the report. In August this year, Max Financial Services had announced that pursuant to the deal, the equity stake held by the company in MLIC will increase from 71 .79% to 91.77%.

The data from Value Research show that mutual funds have invested around Rs 3,400 crore in the Max Financial Services as on September this year. The head of equity at a top fund house that has large exposure to Max Financial Services stocks said, “As of now, they have not disclosed to us why they have terminated the deal. It might be due to the non-disclosure clause between both the companies. But, I would say that it was a share-swapping and there will be no negative implications on the shares of Max Financial Services.”

MFS on Wednesday in an exchange notification said that reference is made to the company’s stock exchange disclosure dated August 6, 2019, whereby we informed the stock exchanges of the decision of the Board to issue and allot 7,35,51,029 equity shares of Max Financial Services Limited of the face value of Rs 2 each , fully paid up, on a preferential basis to Mitsui Sumitomo Insurance Company. For the consideration other than cash, ie, being transfer of 38,33 ,92 ,784 equity shares of the face value of Rs 10 each held by MSI in Max Life Insurance Company Limited, as well as the intention of the Company to purchase from MSI its balance shareholding in MLIC.

“Reference is also made to the stock exchange disclosure made by the Company on September 6, 2019, whereby we informed the stock exchanges that the transaction was approved by way of a special resolution by the members of the Company in its extraordinary general meeting dated September 5, 2019,” said Max Financial Services.

Max Life Insurance is a joint venture with Mitsui Sumitomo Insurance, a Japan-headquartered global insurance leader. As on June quarter, MFS holds 71.79% in Max Life, while foreign shareholder has 25.22% stake in insurer and remaining 2.99% with other shareholders, shows the public disclosures of Max Life Insurance.

The data from Insurance Regulatory and Development Authority of India (Irdai) shows that Max Life Insurance first-year premiums in the current financial year stood at Rs 2,289.16 crore as against Rs 1,907.08 crore in the previous financial year, showing a 20.03% growth. The market share as on September this year is at 1.82% for Max Life, show the Irdai data.

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