Likely nod for non-compete fee in Max Financial vote

Minority shareholders of Max Financial Services are likely to have given their nod for the noncompete fee to be paid to Analjit Singh and his family as part of the Max Life-HDFC Life merger. A postal ballot was held for getting their approval, the results of which will be announced on Tuesday.

In a three-stage deal announced earlier, Max Life, the life insurance subsidiary of Max Financial Services, will merge with the parent. The life insurance business will then merge with HDFC Life. As part of this deal, Singh and his family will receive a non-compete fee of ~501 crore, payable after the transaction is completed. Singh will not be able to start a life insurance business for four years. Subsequently, the promoters will also receive three equal annual instalments totalling ~349 crore.

A query sent to the company remained unanswered.

Sources said minority shareholders including Goldman Sachs (Xenok and GS Mace Holdings) and KKR (Moneyline Portfolio Investments) and some mutual fund houses have given their nod to the non-compete fee payment. Queries sent to them did not elicit any response at the time of going to print. For the quarter ended June 2016, Xenok held 9.02 per cent, GS Mace Holdings held 6.44 per cent while Moneyline Portfolio Investments held 9.95 per cent in Max Financial Services. Mutual funds held 16.71 per cent in Max Financial Services at the end of Q1 of FY17.

Max Financial had sought approval from its public shareholders, who together held 69.55 per cent in the company in June 2016, on the non-compete fee. For the proposal to be approved, Max Financial needs half of these shareholders to agree.