Competition Commission of India approves Axis-Max Life deal

In the last six months since announcement, the deal has already hit many regulatory roadblocks forcing the promoters to make multiple tweaks to the contours. But, finally, with the CCI approval, the wait could come to an end. As per the proposed transaction, Axis entities which comprise of Axis Bank, Axis Capital and Axis Securities will be acquiring a total 19 percent stake in Max Life Insurance.

Out of the 19 percent stake, Axis Bank will be acquiring 9 percent stake, Axis Capital and Axis Securities would be acquiring 2 percent and 1 percent stake respectively in Max Life Insurance.

Since the transaction has been formulated under the automatic route, it would not require any further approval from the Reserve Bank of India (RBI) to proceed further.

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After the CCI approval , the only regulatory go ahead needed would be from the Insurance Regulator (IRDAI). Sources tell CNBC-TV18 that IRDAI is on board with the various contours of the transaction between Max Life and Axis Bank and CCI approval was the only pre-requisite which the insurance regulator was waiting for.  Sources in IRDAI added that now when the CCI approval has been received, final approval from IRDAI should be granted within a week’s time.

On April 28, Axis Bank and Max Financial Services had first announced the deal under which Axis Bank proposed to acquire 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 option’ under which Axis Bank could sell all its shares to Max Financial Services at Rs 294 per share if value creation option was 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.

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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 and announced that it would be acquiring only 17 percent stake in Max Life Insurance, this against 29 percent stake agreed by the bank earlier.

This wasn’t the end to the tweaks as on October 30, Axis Bank and Max Financial Services announced another change in the deal contours. This time, Axis Bank said Axis entities comprising of Axis Bank, Axis Securities and Axis Capital would be acquiring a total of 19 percent stake in Max Life Insurance and the deal structure would be in compliance with RBI regulations.

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.