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 per cent stake in ING Vysya Bank, will become the second largest shareholder in Kotak Mahindra Bank at 6.5 per cent.
The combined banking entity will have a network of 1,214 branches across the country.
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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.
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.