Housing Development Finance Corporation (HDFC) has agreed to acquire a stake of 51.2% in Indian health insurance company Apollo Munich for about INR13.47bn (£152.3m).
Image: HDFC to acquire 51.2% stake in Apollo Munich. Photo: courtesy of rawpixel/Pixabay.com.
As part of the deal, the Indian banking company will acquire the entire stake of 50.8% stake held by Apollo Hospitals Group in Apollo Munich for INR13.36bn (£150m). The remaining 0.4% stake will be bought from shares held by few employees of the health insurance company.
Apollo Munich was formed in 2007 as a joint venture between Apollo Hospitals and German reinsurance giant Munich Re’s division Munich Health.
HDFC said that Munich Health will pay INR2.94bn (£33m) to Apollo’s subsidiaries to scrap the joint venture.
Apollo Munich is subsequently planned to be merged with HDFC ERGO General Insurance, the general insurance subsidiary of HDFC.
HDFC ERGO, in turn, is a joint venture between HDFC (51%) and Munich Re-owned ERGO International (49%).
According to HDFC, the proposed transaction combines two large insurance players that have complementary capabilities with the combination to have a market share of 6.4% in the non-life insurance sector. The merged entity will have 308 branches across India.
Furthermore, the enlarged entity is expected to become the second largest private insurance company in the accident and health segment in India with a market share of 8.2%.
HDFC and HDFC ERGO General Insurance chairman Deepak Parekh said: “Health insurance penetration in India is still at a very nascent stage compared to the global average, but is expected to drive growth of the general insurance industry in the times to come.
“This transaction will strengthen the HDFC group’s commitment to the growing health insurance segment. The combined expertise of HDFC ERGO and Apollo Munich will result in greater product innovation, wider distribution and enhanced servicing capabilities, benefiting their 1.2 crore policy holders.”
Apollo Hospitals, which will exit from the health insurance business, following the deal said that it will use the proceeds from the sale on investing and growing its core healthcare business.
Apollo Munich Health Insurance chairperson and Apollo Hospitals Enterprise vice chairperson Shobana Kamineni said: “Creating financing for illness is critical to building a healthy nation, Apollo Munich played a strategic role in building this Industry. We are glad to pass on the baton of Apollo Munich to a reputed group like HDFC.”
The transaction is expected to be completed within four months subject to regulatory approvals and fulfilment of certain conditions.