Axis Bank-Max Life deal may receive final approval by mid-December as all regulators approve deal structure

It has been a long road for the Axis Bank-Max Life transaction. In the last six months since the announcement, the deal has already hit many regulatory roadblocks forcing the promoters to make multiple tweaks to the contours. But, finally, the wait could come to an end as sources tell CNBC-TV18 that all regulators involved in the transaction have agreed on the suggested deal structure between Axis Bank and Max Life Insurance.

According to sources, the insurance regulator had recently written to the Reserve Bank of India (RBI) and Securities and Exchange Board of India (SEBI) seeking their clearance on the deal structure between Axis Bank and Max Life Insurance. Both banking and market regulator have given their go ahead on the suggested structure.

Under the deal structure suggested, Axis Entities comprising of Axis Bank, Axis Capital and Axis Securities will together acquire a total of 19 percent stake in Max Life Insurance. Out of the total stake to be acquired, Axis Bank will acquire 9 percent stake and Axis Capital and Axis Securities will together acquire 3 percent stake in Max Life Insurance. The balance 7 percent stake will be acquired by Axis Entities in one or multiple tranches at a later stage.

Importantly, sources in IRDAI tell CNBC-TV18 that the insurance regulator also does not have any objection to the deal structure. Max Financial Services, the parent company for Max Life Insurance is expected to file the revised deal papers with IRDAI in the next 7-10 days and final approval from IRDAI can be expected within 15 days after the papers have been filed.

On April 28, Axis Bank and Max Financial Services had first announced the deal under which Axis Bank proposed to acquire a 29 percent stake in Max Life Insurance for Rs 1,592 crore at an agreed price of Rs 28.61 per share. Also, the transaction provided for a put under which Axis Bank could sell all its shares to Max Financial Services at 294 per share if the value creation option is not consummated.

On June 26, CNBC-TV18 had reported on the insurance regulator seeking clarification from Max Life Insurance on some deal contours. Queries sent by IRDAI were regarding the valuation and put option involved in the deal structure. On July 23, Max Financial and Axis Bank decided to make some crucial changes to the value creation option in the deal. According to sources, the changes which led to the removal of the ‘put option’ were made after resistance from the insurance regulator.

On August 25, Axis Bank again tweaked the deal structure as it announced that it would be acquiring only 17 percent stake in Max Life Insurance, this against 29 percent stake agreed by the bank earlier. Finally, on October 30, Axis Bank & Max Financial Services announced another change in the deal contours. This time, Axis Bank said that Axis Entities comprising of Axis Bank, Axis Securities and Axis Capital would be acquiring a total of 19% stake in Max Life Insurance and the deal structure would be in compliance with RBI regulations.

The latest deal structure suggested by Axis Bank and Max Financial Services on October 30 is likely to get regulatory approvals by December-mid. Also, under the latest deal structure, if Axis Bank wishes to sell out its stake in Max Life Insurance it will have to do it at a fair market price. This will beneficial for Max Life Insurance as it won’t be compelled to make any commitment towards value creation.

Source: CNBC Tv18

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