Competition Commission of India (statutory body of Indian Government who is responsible to avoid activities that have an appreciable adverse effect on competition in the market) have given sanction to ICICI Lombard General Insurance Company to acquire the general insurance business of Bharti AXA. As a result of CCI’s approval for the acquisition, the share price of ICICI Lombard rises 2.05% to Rs. 1250.05.
In August 2020, the board of directors of ICICI Lombard General Insurance Company and Bharti AXA General Insurance Company had sanctioned to enter into the definitive agreements for demerger of Bharti AXA’s non-life insurance business into ICICI Lombard through a strategy.
Other than the CCI approval, the closing of the suggested transaction depends on different conditions such as acceptance from the Insurance Regulatory and Development Authority of India (IRDAI), the Securities and Exchange Board of India (SEBI), stock exchanges, Reserve Bank of India (RBI), National Company Law Tribunal (NCLT) and consent by shareholders of both ICICI Lombard and Bharti AXA.
Bharti AXA General Insurance is a joint venture between Bharti and AXA. Bharti is an Indian business group involved in telecom, agriculture business, and retail, holding 51% stake and, AXA is a global insurance and asset management company, holding the balance 49% stake.
ICICI Lombard General Insurance is a private sector non-life insurance company. They offer a diversified range of products, including health, personal accident, marine, engineering, liability insurance, etc, through various distribution channels. They are also engaged in areas like general insurance, reinsurance, insurance claims management, and investment management.
As per the acquisition terms and share exchange ratio approved by the respective boards of these strong companies, the shareholders of Bharti AXA will get 2 shares of ICICI Lombard for every 115 shares of Bharti AXA held by them, as on the date of sanction of the proposal by their respective boards. The combined entity will have a market share of about 8.7 percent on a Pro-forma basis. Through this proposed transaction, ICICI Lombard will be able to multiply its distribution strength with the enduring distribution partnership of Bharti AXA General.
By the way of this acquisition, they are planning to combine their insurance businesses via a share swap deal. Thus the commitment of ICICI Lombard General Insurance Company to acquire Bharti AXA General Insurance Company will result in value creation for all the stakeholders through meaningful revenue and operational synergies.