Tata Sons Board Considered Acquiring PNB MetLife The Day Mistry Was Removed As Chairman
Tata Sons discussed acquiring PNB MetLife at the October 24 board meeting.
On the fateful day of October 24, when the board of Tata Sons met at 2 p.m. to remove Cyrus Mistry as the executive chairman, the board also considered making a non-binding bid for PNB MetLife Life Insurance Ltd., according to the minutes of the board meeting. The two investment firms run by Mistry’s family, who have now approached the National Company Law Tribunal, have included the minutes of the board meeting in their petition.
The proposal was brought up for consideration of the Tata Sons board members by Ishaat Hussain, finance director at the group holding company and also chairman of Tata AIA Life Insurance Company Ltd. Hussain informed the board of an opportunity to acquire a majority stake in PNB MetLife, for which a non-binding bid was being sought.
He also apprised the board of the current shareholding structure of PNB Metlife:
- Punjab National Bank: 30 percent
- Elpro: 21 percent
- M Pallonji and Company Private Ltd: 18 percent
- J&K Bank Ltd.: 5 percent
- Metlife: 26 percent
M Pallonji and Company belongs to Mehli Mistry, an old friend of Ratan Tata and a relative of Cyrus Mistry.
Read: Tata Power To Investigate Contracts Awarded To Mehli Mistry’s Companies
Hussain also proposed the following deal structure to the board of Tata Sons, as has been documented in the minutes of the board meeting on October 24.
- Tata Sons and AIA would acquire 70 percent, by buying out all other shareholders except PNB, and this would be followed by a merger of the two life insurance companies.
- PNB would have the option to sell its stake in the merged entity through a ‘put’ option in 3 years or Tata and AIA can exercise a ‘call’ option in four to five years post-merger.
- The deal would initially cost Tata Sons between Rs 1,500 - 2,700 crore, and its shareholding in Tata AIA Life Insurance would get diluted to 45 percent from 51 percent.
The board gave its approval for Tata AIA to put in a non-binding bid for PNB MetLife and Hussain informed the board that the insurance company would report back to the parent on any further developments.