Mitsui Sumitomo to acquire 21.87 per cent stake in Max Financial Services through a share swap

The Board of Max Financial Services Ltd (MFSL) has approved a transaction which will allow Mitsui Sumitomo Insurance (MSI) to swap 20.57 per cent of its shareholding in Max Life insurance with 21.87 per cent stake in MFS.

New Delhi [India] March 5 (/NewsVoir): The Board of Max Financial Services Ltd (MFSL) has approved a transaction which will allow Mitsui Sumitomo Insurance (MSI) to swap 20.57 per cent of its shareholding in Max Life insurance with 21.87 per cent stake in MFS.

MSI is a part of the world's seventh-largest MS&AD insurance group holding of Japan. Max Financial Services and MSI are 73:25 joint venture partners in India's fourth-largest private Life Insurer Max Life Insurance Company.

This will enable the company to simplify the shareholding structure in its subsidiary and have more flexibility to attract strategic investments in Max Life in the future and yet maintain its significant majority ownership.

The transaction will also provide MFS the option to purchase from MSI its balance shareholding in Max Life for cash at a price of Rs 85 per share.

The transaction structure will involve MSI subscribing 75,458,088 shares of MFS having a par value of Rs 2/- each at a price of Rs 565.11 per share aggregating to 21.87 per cent of the paid-up equity share capital of the Company on the date of allotment of the aforesaid fresh shares.

In consideration, MFS will receive 394,775,831 shares of Rs 10/- each from MSI at a price of Rs 108.02 per share translating into 20.57 per cent stake of MLIC. Pursuant to this, the equity stake held by MFS in Max Life will increase to 93.10 per cent. The transaction will lead to a change in MFS' shareholding pattern as below:

MFS is listed on the National Stock Exchange and Bombay Stock Exchange. Its sole operating subsidiary Max Life is the largest non-bank owned private life insurer in India. Max Life has been at the forefront of the current buoyant phase in the Indian Life sector.

For nine months ending December 31, 2019, Max Life reported Market-Consistent Embedded Value (MCEV) of Rs. 10,077 crore; an Operating Return on EV (RoEV) of 18.4 per cent; Value of New Business1 (VNB) at Rs. 576 crores, growing 24 per cent YoY and the New Business Margin2 (NBM) of 21 per cent, 60 bps higher YoY.

"We value MSI as our long term partners in the life insurance business and we are confident that they will continue to provide their expertise and counsel to MFS and Max Life through the Board Governance mechsm. This transaction makes the holding structure simpler and helps consolidate our shareholding in Max Life which is expected to benefit all our shareholders by attracting more investor interest", said Mohit Talwar, MD, Max Financial Services and Vice Chairman, Max Group.

The transaction is subject to requisite approvals and is expected to be concluded by June 2020.

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( With inputs from ANI )