ING Vysya to merge with Kotak Mahindra Bank - Indian Express

In a move that could kick off consolidation in the banking sector, private lenders Kotak Mahindra Bank and ING Vysya Bank have decided to merge to form a banking entity in an all-stock deal worth Rs 15,000 crore and a combined market capitalisation of over Rs 1 lakh crore.

The proposed takeover deal will make Kotak the fourth largest private bank with combined assets of close to Rs 2 lakh crore after ICICI Bank, HDFC Bank and Axis Bank and help the lender expand its national footprint, especially in the South, and boost its corporate banking business.

The boards of the banks have approved the merger and share swap ratio. ING Vysya shareholders will receive 725 shares in Kotak for 1,000 shares of ING Vysya. Amsterdam-based ING Group, which owns 43 per cent in ING Vysya, has indicated that it will support the proposed transaction, and will become the largest non-promoter shareholder with a 7 per cent stake in the combined Kotak.

The Indian Express had reported on November 11 that ING Vysya Bank was on the block. While ING Vysya was negotiating with various suitors, including L&T Finance, for a merger, Kotak sprang a surprise and clinched the deal on Wednesday.

This exchange ratio indicates an implied price of Rs 790 for each ING Vysya share based on the average closing price of Kotak shares during one month to November 19, 2014, valuing the deal at Rs 15,000 crore. The merger would result in issuance of 15.2 per cent of the equity capital of the merged Kotak. One of ING Vysya’s directors will be joining the board of Kotak. All ING Vysya branches and employees will become Kotak branches and employees. ING Vysya’s CEO designate Uday Sareen will be inducted into the top management of Kotak.

Anticipating a merger announcement, Kotak shares soared by 7.28 per cent to Rs 1,157.05 and ING Vysya vaulted by 7.15 per cent to Rs 814.20 on the BSE on Thursday. The deposit base of the merged entity will cross Rs 1 lakh crore as Kotak Mahindra has deposits of Rs 68,102 crore and ING Vysya Rs 44,651 crore. The combined Kotak will have 1,214 branches. While Kotak, with 641 branches has relatively deeper presence in the West and North, ING Vysya with a national branch network of 573 branches has a strong presence in South India.

“The opportunities and synergies that this merger will create will place Kotak and its incoming stakeholders from ING Vysya on a new trajectory. This merger will pave the way for a bigger and better financial services player with deep Indian roots and global standards of service,” said Uday Kotak, vice chairman and MD of Kotak Mahindra.

ING Vysya’s Sareen, said, “The merger is a game-changer for us, laying the foundation to help us leap-frog by several years and be part of, and further scale a truly national franchise.”

Banking analysts said more consolidation is expected in the private banking space. “Most private sector banks, a few exceptions do exist, do not really have coverage across continued…