Multiple business corporate Max India Ltd. board Tuesday decided to vertically split the company into three listed entities and also approved divestment of its clinical research business.
"Upon completion of the demerger, the existing company Max India Limited, is proposed to be renamed 'Max Financial Services Limited' (MFS) and will focus solely on the group's flagship life insurance activity, through its 72.1 percent shareholding in Max Life (Max Life Insurance Company), making it the first Indian listed company exclusively focused on life insurance," the company said in a statement.
Max Life Insurance is a joint venture with Japanese Mitsui Sumitomo Insurance Co. Ltd.
The cash reserves of Max India totalling around Rs.605 crore as on Dec 31, 2014, is proposed to be split among the three listed companies Max Financial Services (Rs.150 crore), Max Ventures and Industries (Rs.10 crore), and the balance for Max India (the new company to be formed).
The second vertical that would continue to manage investments in health and allied businesses will be named as Max India.
The demerger will provide these businesses, which are currently in their growth and development phases, sharpened focus to fulfil their tremendous potential, Max India said.
The Corporate Management Services team will manage a shared services centre, which will provide functional support to all three verticals.
The third vertical will house the investment activity in the group's manufacturing subsidiary-Rs.745 crore turnover Max Speciality Films involved in the speciality packaging films business and will be named as Max Ventures and Industries Ltd.
According to the statement, Max India has also started the initiative to exit fully the clinical research business.
"Max Neeman entities in India and United States are proposed to be divested to a Canadian Contract Research Organization (CRO), JSS Medical Research Inc., for a consideration of $1.5 million, subject to successful completion of due diligence and signing of definitive agreements, expected by mid-February," the statement said.
Once the demerger scheme is effective, after due regulatory approvals, Max India's shareholders will retain one equity share of Rs.2 in Max Financial Services.
They will also will additionally get one equity share of Rs.2 each of Max India Limited (new company) for every one equity share of Rs.2 each held in Max Financial Services, and one equity share of Rs. 10 each of Max Ventures and Industries for every five equity shares of Rs.2 each held in Max Financial Services.
Meanwhile, the promoter of Max India -- Analjit Singh -- announced his intention to make a voluntary open offer for buying up to an additional 34.5 percent stake in Max Ventures and Industries which will hold the investment in Max Speciality Films.
The voluntary open offer is proposed to be formally made upon completion of demerger of Max India and listing of Max Ventures and Industries at an approximate valuation of Rs. 168 crore for entire stake of the company.
Post-demerger, Max Ventures and Industries would hold 99 percent equity in Max Speciality Films.
"The new government is setting a rapid pace for economic reforms. This structural reconfiguration readies us to capitalise on opportunities created by the anticipated all round growth acceleration and to henceforth look at the wider world of business opportunities," Singh said.
Explaining the rationale for the demerger, he added: "Our bouquet of businesses is diverse, but each has considerable value and growth potential. This demerger will provide investors with a choice to continue to be associated with all these businesses, or only specifically invest in the set of businesses that suit their respective investment philosophy."
