ICICI Bank, Prudential sign undertaking to defuse conflict-of-interest concerns ahead of Bharti Life deal
Mumbai: ICICI Bank and Prudential Corp. Holdings has signed a letter of engagement in which it will temporarily waive votes on matters requiring special decisions and refrain from board representation at ICICI Prudential Life Insurance while acquiring a controlling stake in the UK insurer’s Bharti Life Insurance, according to stock exchange filings on Sunday.
The undertaking signed on Saturday between two promoters of ICICI Prudential Life aims to address potential conflicts of interest arising from Prudential’s bid to acquire Bharti Life. The deal comes before ICICI Prudential Life approached the Insurance Regulatory and Development Authority of India (Irdai) to reclassify Prudential from promoter to investor. The insurer clarified in a separate application that it was not a party to the undertaking.
The engagement is subject to ICICI Prudential Life’s board of directors and relevant regulatory approvals.
The undertaking also provides for the possibility of a name change in case ICICI Prudential Life decides to drop “Prudential” following Prudential’s reclassification. In this case, the UK insurer agreed to support the transition, including limited use of the Prudential brand and iciciprulife.com domain.
Under the agreement, Prudential will refrain from voting on matters requiring private resolution unless it directly affects its rights or interests. The regulation will remain in force from the date of ICICI Prudential Life’s application for reclassification to Irdai until the Bharti Life transaction is completed or the regulator directs otherwise.
Prudential will also ensure that the director nominee resigns from the board of ICICI Prudential Life after the company’s board of directors approves the reclassification proposal. He will not nominate another manager during this period.
After the reclassification comes into force, ICICI Bank has agreed to vote in favor of appointing a Prudential nominee to the board, provided that Prudential holds at least 10 per cent stake in the insurer and is not a promoter of or owns more than 10 per cent stake in another Indian life insurer.
The filings state that the undertaking was signed to address potential conflicts of interest arising from Prudential’s bid to acquire Bharti Life Insurance. They also clarify that the agreement does not constitute a related party transaction because it does not involve any transfer of resources, services or obligations.
This initiative comes after Prudential announced in May that it would acquire a 75% stake in Bharti Life Insurance. ₹With additional payment of up to ₹ 3,500 crore. ₹700 crore subject to certain conditions. As part of the transaction, Prudential said it would reduce its stake in ICICI Prudential Life from approximately 21.9% to 10%. As on June 30, ICICI Bank held 50.84% of ICICI Prudential Life, while Prudential held 21.89%.
The deal comes just days after Irdai approved Prudential HCL Health Insurance, a 70:30 joint venture between Prudential Group and HCL Group, making it the eighth independent health insurer in India.
Prudential plc is an insurance company and asset manager registered in London and Hong Kong, operating in Asia and Africa. India is one of the largest markets where it has interests in life insurance, health insurance and asset management.
