Mumbai, Nov 21: In India's biggest banking merger, Kotak Mahindra Bank on Thursday announced acquisition of mid-sized private sector ING Vysya Bank for about Rs 15,000 crore.
The merger will catapult the nation's fourth largest private bank to nearly Rs 2 lakh crore balance-sheet size ahead of the entry of new players next year.
In the all-share deal, 725 equity shares of Rs 5 each (face value) of Kotak Mahindra will be issued for every 1,000 shares of Rs 10 each held in ING Vysya Bank.
Post merger, Dutch lender ING Group NV which currently holds 42.73 percent stake in ING Vysya Bank, will become the second largest shareholder in Kotak Mahindra Bank at 6.5 percent.
Holding of Uday Kotak in the merged entity will also be diluted to 34 percent from 39.71 percent. The deal will help him to comply with RBI directive of bringing his stake down to 30 percent by end of 2016.
The combined banking entity will have a network of 1,214 branches across the country.
Announcing the deal, Uday Kotak, Vice Chairman and Managing Director, Kotak Mahindra Bank said, the deal is expected to close by April 1 after it gets all statutory approvals, including from RBI and Competition Commission of India.
The share swap ratio announced indicates a price of Rs 790 for each ING Vysya Bank share based on average closing price this month, valuing the deal at just over Rs 15,000 crore.
ING Vysya Bank shares closed 7.15 percent at Rs 814.20 per on the BSE ahead of the announcement which came after trading hours. Kotak Mahindra Bank too jumped by 7.28 percent to close at Rs 1,157.05 per unit at the BSE.
This is the first amalgamation of a profit earning entity post global financial meltdown in 2008. Although two more mergers took place during this period but those were amalgamations under different circumstances.
In 2010, Bank of Rajasthan was merged with country's largest private sector lender ICICI Bank. Bank of Rajasthan was a loss making entity and its networth had turned negative.
A subsidiary of SBI, State Bank of Indore was merged with the parent in the same year. This was in continuation of the proposed policy of amalgamation of its subsidiaries over a period of time.
Post merger, the ING Vysya Bank branches would be rebranded as Kotak Mahindra Bank and all subsidiaries will be part of the merged entities.
Asked if there would be rationalisation of employees, Kotak said, "There is no plan."
There is no immediate plan to raise fund as the merged entity have adequate capital, he said.
Shares of the both the banks hit 52-week highs before the merger announcement was made public.
Kotak said the bank will seek RBI permission for raising foreign investment holding to 49 per cent. The foreign holding of the combined entity would go up to around 43 per cent.
There would be branch rationalisation based on efficiency, he said.
"Obviously there would be appropriate action plan for efficient branch management. At this point of time, we won't be going in for branch cutting spree," he said.
The acquisition would help Kotak Mahindra Bank widen its reach in South Indian market. The deal would also help Kotak Mahindra Bank in acquiring SME customers. Kotak has been strong in retail segment as it started its operation as NBFC and graduated into a bank in 2004.
"This revenue synergy led and growth oriented amalgamation, adopting the best practices of the banking, governance and prudence from both banks is expected to result in a superior platform benefiting from efficiencies of size and scope over time for all shareholders, customers and employees," he said.
"I am excited to announce the merger of Kotak Mahindra Bank and ING Vysya Bank, subject to approvals. We will work to create stakeholder value," he added.
The last merger in the banking space took place in 2010 when ICICI Bank amalgamated Bank of Rajasthan.