Mumbai: Reliance Capital Ltd, the financial services arm of Anil Ambani-led Reliance Group, is exiting the mutual fund business by selling its entire stake in Reliance Nippon Life Asset Management for Rs 6,000 crore ($860 million) to Japan’s Nippon Group.
Reliance Cap will use the entire amount to reduce its outstanding debt by 33 per cent.
The company will sell its 42.88 per cent stake to Nippon Life Insurance and other financial investors in the joint venture, it said in a statement.
Nippon, which also owns 42.88 per cent of the joint venture, will increase its shareholding to 75 per cent, while the public currently owns a 14.25 per cent stake in the asset management company.
Nippon Life said it will make an open offer to the public shareholders of RNAM at Rs 230 per share, the price at which it is acquiring the stake from Reliance Capital.
The open offer price is at a 15.5 per cent premium to the stock’s 60-day average price, in tune with the Sebi Takeover Regulations.
Later in the day, Nippon Life Insurance made an open offer for acquisition of up to 8.99 crore shares representing 14.63 per cent of the expanded voting share capital of Reliance Nippon Life Asset Management Ltd from the public shareholders.
At the price of Rs 230 per share, the aggregate offer is for a consideration of Rs 2,068.89 crore.
In the public announcement of the open offer, Nippon Life said the acquirer is not obligated to acquire 8.66 per cent of the existing share capital currently pledged by the seller (Reliance Capital) to an existing lender.
Open offer has been made since Nippon Life Insurance has entered into the agreement to acquire voting rights in excess of five per cent of the existing share capital in this financial year.
After completion of the acquisition of the shares and the open offer, Reliance Capital will cease to exercise control over the company.
In a separate filing, Reliance Nippon Life Asset Management Ltd said Anil Ambani's son Jai Anmol Ambani has tendered his resignation as a director of the company, with effect from May 23.
"Nippon Life views its India employees and the management team of the asset management business led by Sundeep Sikka as its joint partner in India," said Yutaka Ideguchi, Director and Managing Executive Officer of Nippon Life Insurance.
"They have contributed significantly for the successful track record of business over the years. As existing shareholders, we are very confident that the current management team will continue to take this journey forward which started many years back," he said in a statement.
Nippon Life Insurance had made initial investment in RNAM in 2012. The company will continue to run its operations without any change in structure and management.
"I am delighted that Nippon Life Insurance has chosen to increase its holding in the company. They have been very supportive shareholders and this transaction will ensure continuity in strategy," said Sundeep Sikka, CEO and Executive Director of RNAM.
"I am confident that we will continue to benefit from Nippon Life's leading practices in risk management and leverage its global network to significantly enhance capital inflows into India," he said.
Nippon Life's total investment in RNAM will be over Rs 7,800 crore and over Rs 5,000 crore in Reliance Nippon Life Insurance Co Ltd, cumulatively adding up to over Rs 12,800 crore, among the largest FDI investments into India in the financial services sector.