* Companies agree terms of share swap
* Relative valuation of HDFC Life 69 pct, Max Life 31 pct
* Deal to create top Indian private life insurer
By Devidutta Tripathy
MUMBAI, Aug 8 (Reuters) - India's HDFC Standard LifeInsurance Co Ltd reached agreement on Monday to take oversmaller rival Max Life Insurance in an all-stock deal to createthe nation's top private life insurer valued at nearly $10billion.
The companies, which began deal talks in June, said HDFCLife shareholders would own 69 percent of the new company andMax Life shareholders 31 percent.
As part of the deal, Max Life is to be merged into parentMax Financial Services, which in turn will combine itslife insurance business with HDFC Life, making it a publiclytraded company.
Based on the current share price of Max Financial, thecombined entity will be valued at about 650 billion rupees ($9.73 billion), HDFC Life Chief Executive Amitabh Chaudhry tolda news conference.
In the first stage of the transaction, Max Life shareholderswill get one share of Max Financial Services for every 4.98shares of Max Life.
In the deal to combine their life insurance businesses, MaxFinancial Services' shareholders will get 2.33 shares of HDFCLife for every Max Financial share held.
HDFC Life is also paying a non-compete fee totalling 8.5billion rupees in cash to Max Financial's founders over fouryears, the companies said.
Indian mortgage lender Housing Development Finance Corp, which currently owns a majority of HDFC Life, willhold about 42.5 percent in the insurance company after the deal,while Britain's Standard Life Plc will have about 24percent of HDFC Life.
Current sponsors of Max Financial will own 6.6 percent ofthe merged entity, while Japan's Mitsui Sumitomo Insurance Co.which currently owns a stake in Max Life will get about 7.5percent of the combined entity.
Before the announcement, Max Financial shares closed 1.7percent lower, while HDFC shares rose 1.9 percent in a Mumbaimarket that gained 0.3 percent.
The deal is expected to kick-start consolidation in India'slucrative yet crowded $50 billion insurance sector.
Insurers see plenty of room for growth in the world'ssecond-most populous nation of 1.3 billion, where relatively fewpeople hold insurance policies. However, strong competition andhigh capital requirements have seen the top players gainingmarket share and smaller companies struggling.
In a market dominated by state-run Life Insurance Corp, thetop four of the 23 private sector insurers account for 65percent of the private sector insurance market, according toHDFC.
HDFC Life is currently the third-biggest private sector lifeinsurer in India, while Max Life is fourth-biggest. Thecompanies have a combined market share of 10.8 percent based onnew business premiums received for insuring individuals.
The companies expect the merger to be completed within 12months, HDFC's Chairman Deepak Parekh said at the newsconference. ($1 = 66.8205 Indian rupees) (Reporting by Devidutta Tripathy; Editing by Adrian Croft)
