MUMBAI: In the largest bank merger in India, Kotak Mahindra Bank announced Thursday the acquisition of medium size ING Vysya Bank private sector a share deal worth Rs 15,000 crore.
The merger will catapult fourth-largest private bank to nearly Rs 2 lakh rupees balance overall size ahead of the entry of new players next year.
In-share deal, 725 equity shares of Rs 5 each (nominal value) of Kotak Mahindra will be issued for each 1,000 shares of Rs.10 each ING Vysya Bank held in.
Post merger, Dutch lender ING Group NV currently has 42.73 percent stake in ING Vysya Bank capita, will become the second largest shareholder of Kotak Mahindra Bank at 6.5 percent.
Uday Kotak holding in the merged entity will also be diluted to 34 percent from 39.71 percent. The agreement will help meet RBI policy of bringing its stake to 30 percent by the end of 2016.
The combined bank will have a network of 1,214 branches across the country.
Announcing the vice president agreement, Uday Kotak, and CEO, Kotak Mahindra Bank said, it expects the deal to close before April 1, after it gets all regulatory approvals, including the Commission of India RBI and Competition.
The exchange ratio of shares announced indicates a price of Rs 790 per share of ING Vysya Bank, according to the average closing price of this month, valuing the deal at just over Rs 15,000 crore.
ING Vysya Bank shares closed 7.15 percent to 814.20 rupees on BSE before the announcement came after trading hours. Kotak Mahindra Bank also increased by 7.28 percent to close at 1157.05 rupees per unit on the BSE.
This is the first merger of a profit entity profit after financial crisis in 2008. Although two mergers took place during this period, but these were mergers in different circumstances.
In 2010, Bank of Rajasthan merged with the largest private sector lender ICICI Bank country. Bank of Rajasthan was a loss-making entity and its networth was negative.
A subsidiary of SBI, State Bank of Indore merged with the parent in the same year. This was in continuation of the policy proposed merger of its subsidiaries for a period of time.
After concentration, ING Vysya Bank branches would be renamed Kotak Mahindra Bank and all subsidiaries will be part of the merged entities.
When asked if there would be rationalization of employees, Kotak said, "There is no plan."
There is no immediate plan to raise funds for the merged entity has sufficient capital, said.
The shares of the two banks hit 52-week highs before the announcement of the merger was announced.
Kotak said the bank will ask permission RBI to increase foreign investment holding to 49 percent. Foreign ownership of the combined entity would be up to about 43 percent.
Would branch rationalization based on efficiency, he said.
"Obviously there would appropriate action plan for managing the efficient branch. At this point in time, not going on a spree to cut the branch," he said.
The acquisition would help Kotak Mahindra Bank expand its market reach South India. The agreement would also help Kotak Mahindra Bank in acquiring SME clients. Kotak has been strong in the retail segment as it began to function as NBFC and graduated from a bank in 2004.
"This synergy led revenue and growth oriented amalgam, adopting best practices of banking, governance and prudence of both banks are expected to result in a superior platform that benefit from the efficiency of size and scope over time to all shareholders, customers and employees, "he said.
"I am very excited to announce the merger of Kotak Mahindra Bank and ING Vysya Bank, subject to approvals. We will work to create value for shareholders," he added.
The latest merger in the banking space took place in 2010 when the Bank ICICI Bank amalgamated Rajasthan.
