Kotak buys ING Vysya in all-share deal
New Delhi: Kotak Mahindra Bank is acquiring Bengalaru-headquartered ING Vysya 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.
Following the acquisition, Kotak's network of 641 branches will nearly double with the addition of 573 branches of ING Vysya Bank. Kotak Bank, currently present in metros, will benefit from ING Vysya's better mix of rural and urban branches along with its strong presence in South India.
The deal will also help Uday Kotak reduce the promoter's stake in Kotak Bank, in accordance 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.
"The transaction would be subject to approval of shareholders of both the banks as well as statutory approval from RBI and Competition Commission of India," a statement from Kotak Mahindra Bank said.
Netherlands-based ING holds 42.73 per cent stake in ING Vysya Bank through two investment vehicles routed through Mauritius.
The statement further said: "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."
"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 Mahindra Bank managing director and vice-chairman Uday Kotak tweeted.
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 expects the new entity to be operational by April 1, 2015.