Max India on Thursday said Japan's Mitsui Sumitomo Insurance Company (MSI) will acquire 26% stake in India's largest non-banking private insurance company Max New York Life Insurance (MNYL), sending Max India's shares up 8.3%.
US-based insurer New York Life (NY Life) is exiting from MNYL by selling its 26% stake, Max India said in a filing to the Bombay Stock Exchange.
Mitsui Sumitomo Insurance is one of the core units of Japan's largest property-casualty insurer by revenue MS&AD Insurance Group. MS&AD Insurance Group, the seventh-largest non-insurance company globally, is an integration among Mitsui Sumitomo Insurance, Aioi Insurance and Nissay Dowa General Insurance.
In an all-cash transaction, MS&AD will pay Rs. 2,731 crore for the stake, making it the second-highest valued deal in India's private life insurance space. The transaction values MNYL at R10,504 crore.The new joint venture will be called Max Life Insurance Company (MLIC).
"It was a part of New York Life's strategic decision of rewinding from their international footprints, like they did last year from China, Thailand," said Analjit Singh, chairman, Max India Ltd. "Our partnership had been extremely effective and successfully well run. For the next stage of MNYL's growth, we view MS&AD as an ideal partner," said Singh
Under the complex agreement, NY Life will sell 16.6% of its holding to MSI, according to PTI. The remaining 9.4% would be sold to Max India for Rs. 182 crore. Further, Max India would sell 9.4% stake in the life insurance company to MSI for Rs. 984 crore, the filing added.
"Post transaction, Max India's majority stake of 70% will remain unchanged," Singh said.
Max India will get a pre-tax benefit of Rs. 802 crore and Rs. 77 crore towards brand fee waiver out of this transaction.
"India is a highly promising market for insurance sector and after identifying MNYL as an attractive proposition, we have signed shareholders agreement with Max India" said Yasuyoshi Karasawa, president and CEO, Mitsui Sumitomo. "Sales and acquisition procedures will be done in next few months after insurance regulator IRDA's approval."
The deal led internally by all the three companies and Max India engaged Goldman Sachs as its financial advisor, while Citi Group advised MS&AD.
"We're not leaving India, as we are very bullish about India, but our operations will focus in the US and Mexico," said chief financial officer, New York Life Insurance, Michael Sproule.