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India's Biggest Banking Merger
Nov 28, 2014

Kotak Mahindra Bank announced it was acquiring Bengalaru-headquartered ING Vyasa Bank in an all-stock deal. ING shareholders will get 725 Kotak Bank shares for every 1,000 shares they hold. The deal will make Kotak the fourth-largest private bank in the country in terms of total business. The biggest three are ICICI Bank, HDFC Bank and Axis Bank, in that order. The combined banking entity will have a widespread network of 1,214 branches across the country.

The deal implies a price of Rs 790 for each ING Vysya share, based on the average closing price of Kotak shares during the month to November 19, valuing the deal at around Rs 15,000 crore. That was a 16 per cent premium to a like measure of ING Vysya market price.

The proposed merger would result in issuance of around 15.2 per cent of the equity share capital of the merged Kotak. The deal will need regulatory approvals, including those from the Reserve Bank of India and Competition Commission of India. The management of the banks expect the new entity to be operational by April 1, 2015.

The deal will also help Uday Kotak reduce the promoter’s stake in Kotak Bank, in line with the road map given by the Reserve Bank of India. After the merger, promoter shareholding in Kotak Bank will come down from 40 per cent to 34 per cent. The RBI had asked Kotak to lower this to 30 per cent by December 2016.

With ING Vysya nearing the foreign shareholding cap of 74 per cent, this merger would yield more liquidity and significant headroom for foreign money, as the foreign shareholding after the merger would be 47 per cent, the press statement said. The promoters hold a 42 per cent stake in ING Vysya Bank.

After the merger, the ING group, with a 6.4 per cent stake, will become the second-largest shareholder in the bank. According to regulations, RBI’s approval is required for an entity other than the promoter to have more than five per cent stake in a bank.


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