Mumbai: ICICI Bank and Prudential Corp. Holdings have signed a letter of undertaking under which the UK insurer will temporarily give up board representation and abstain from voting on matters requiring special resolutions at ICICI Prudential Life Insurance while it pursues the acquisition of a controlling stake in Bharti Life Insurance, according to exchange filings on Sunday.
The undertaking, signed between the two promoters of ICICI Prudential Life on Saturday, seeks to address potential conflicts of interest arising from Prudential’s proposed acquisition of Bharti Life. The agreement comes ahead of ICICI Prudential Life applying to the Insurance Regulatory and Development Authority of India (Irdai) to reclassify Prudential from a promoter to an investor. The insurer clarified in a separate filing that it is not a party to the undertaking.
The undertaking is subject to ICICI Prudential Life’s board and applicable regulatory approvals.
The undertaking also provides for the possibility of a name change if ICICI Prudential Life decides to remove “Prudential” following Prudential’s reclassification. In that event, the UK insurer has agreed to support the transition, including limited use of the Prudential brand and the iciciprulife.com domain.
Under the agreement, Prudential will abstain from voting on matters requiring a special resolution unless they directly affect its rights or interests. The arrangement will remain in force from the date ICICI Prudential Life files its reclassification application with Irdai until the Bharti Life transaction is completed or until the regulator directs otherwise.
Prudential will also ensure that its nominee director resigns from the ICICI Prudential Life board once the company’s board approves the reclassification proposal. It will not nominate another director during this period.
After the reclassification takes effect, ICICI Bank has agreed to vote in favour of appointing one Prudential nominee to the board, provided Prudential retains at least a 10% stake in the insurer and is neither a promoter of, nor holds more than 10% in, another Indian life insurer.
The filings state that the undertaking was signed to address potential conflicts of interest arising from Prudential’s proposed acquisition of Bharti Life Insurance. They also clarify that the arrangement does not constitute a related-party transaction because it does not involve any transfer of resources, services or obligations.
The undertaking follows Prudential’s announcement in May that it would acquire a 75% stake in Bharti Life Insurance for ₹3,500 crore, with an additional payment of up to ₹700 crore linked to certain conditions. As part of the transaction, Prudential said it would reduce its holding in ICICI Prudential Life to 10% from about 21.9%. As of 30 June, ICICI Bank held 50.84% in ICICI Prudential Life, while Prudential owned 21.89%.
The agreement comes days after Irdai approved Prudential HCL Health Insurance, a 70:30 joint venture between Prudential Group and HCL Group, making it the eighth standalone health insurer in India.
Prudential plc is a London and Hong Kong-listed insurer and asset manager with operations across Asia and Africa. India is one of its largest markets, where it has interests in life insurance, health insurance and asset management.
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