Unable arrive at an acceptable structure and valuation, financial services majors IDFC Group and the Shriram Group have decided to call off their merger proposal to create a financial conglomerate, both announced on Monday.In a regulatory filing in BSE, IDFC said: "This is to inform you that despite best efforts, IDFC Group and Shriram Group have not been able to reach common ground on a mutually acceptable swap ratio for the merger.Accordingly, both parties have agreed to call off discussions on a potential merger and the exclusivity period pursuant to the CES Agreement entered into between the concerned parties stands terminated with immediate effect." In its filing with BSE, Shriram City Union Finance Ltd said: "Despite best efforts by both Shriram and IDFC, we could not hit a common ground and arrive at a mutually acceptable Structure and Valuation. Further, both Parties have agreed for aborting any further discussions on the Proposed potential combination. Consequently the 'Confidentiality, Exclusivity and Standstill Agreement' entered between both the Groups stands terminated with immediate effect."The two groups on July 8 had announced a possible merger and signed a 90-day CES agreement and later extended for another 90 days.The merger was to create a "financial conglomerate", Shriram and Piramal Group Chairman Ajay Piramal had then said.
According to reports, some shareholders of IDFC and Shriram were not agreeable to the valuation of the two groups.The two groups had entered into a confidentiality agreement to evaluate a potential combination certain businesses and subsidiaries/affiliates and associate companies of Shriram group with IDFC Group.The Shriram group, engaged in credit and non-credit (insurance) financial services, has three listed entities - Shriram Asset Management Company Ltd, Shriram City Union Finance Ltd and Shriram Transport Finance Company Ltd - operating in the non-banking finance domain.It also has life insurance joint venture with South Africa's Sanlam and its own general insurance company.As per broad scheme of merger announced between IDFC Group and Shriram Group, the two insurance companies and listed Shriram Transport were to become subsidiaries of IDFC. The other listed entity Shriram City Union Finance was to be absorbed by IDFC Bank.The operating businesses of both the groups would have come under IDFC.For the Shriram Group, Shriram Capital Ltd is the overreaching holding company for the financial services and insurance companies.