Leading mid-size banks Kotak Mahindra Bank (KMB) and ING Vysya Bank Ltd Thursday announced a merger in an all-stock deal to become the fourth largest private bank in the country after ICICI Bank, HDFC Bank and Axis Bank.
The merger, approved by the boards of both the banks earlier in the day, will be in the swap ratio of 725:1000 equity shares, subject to approval of their shareholders, Reserve Bank of India, the Competition Commission of India and other regulators. ING Vysya investors will receive 725 shares of Kotak for every 1,000 shares they hold.
Kotak scrip, with a face value of Rs.5 per share, shot up 7.28 percent to Rs.1,157.05 at the end of Thursday's trading from its opening price of Rs.1,098.90 on the Bombay Stock Exchange (BSE).
Similarly, ING Vysya scrip, with a face value of Rs.10 per share, increased 7.15 percent to Rs.814.20 at the end of trading from its opening price of Rs.788 on the BSE.
The Bengaluru-based ING Vysya Bank is a multinational entity, with the Dutch ING Group holding 43 percent of its equity, following its acquisition of the city-based Vysya Bank Ltd in 2002.
"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," Kotak vice-chairman and managing director Uday Kotak told reporters here.
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The market value of the merged entity is estimated to be a whopping Rs.1 trillion (Rs.1 lakh crore).
"The swap ratio indicates a price of Rs.790 for each ING Vysya share based on the average closing price of our bank's shares during 30 days to Nov 19, which is a 16 percent premium to that of ING Vysya market price," the Mumbai-based Kotak Bank said in a regulatory filing to the BSE.
The proposed merger will result in issuing 15.2 percent of the equity share capital of the merged Kotak.
One of ING Vysya's directors will also join the Kotak board after the merger.
Post-merger, all ING Vysya branches and employees will become Kotak branches and employees and its chief executive designate Uday Sareen will be inducted into Kotak's top management and will report to its vice-chairman.
With 641 branches across the country, mostly in western and northern states, Kotak caters to diverse customer segments, including high networth individuals (HNIs) and corporates, while ING Vysya, has a national network of 573 branches, including 441 across the southern region, primarily in Karnataka, Andhra Pradesh and Telangana.
The combined Kotak will have 1,214 branches, with a pan-India network.
"Customers and employees will benefit from the combined Kotak having a wider geographical spread, expertise across customer segments, such as SME (small and medium enterprises), HNI, corporates, and on products such as private banking, asset management, insurance, investment banking and NRI offerings," the statement added.