Kotak buys ING Vysya in all-share deal

The acquisition values the latter at about `16,500 crore; Kotak to become 4th largest private bank

Mega merger

• Kotak Mahindra Bank acquired ING Vysya Bank in an all-share transaction
• The deal will make Kotak the fourth largest private bank
• Swap of 725:1000 (725 Kotak shares issued for every 1,000 shares held in ING Vysya Bank)
• The merger is subject to approval of shareholders of both the banks and statutory nod from RBI and CCI
• The merged entity will have 1,214 branches
• Both the banks are traditionally focused on corporate and retail banking
• Presently ING group hold 42.73% and in the new entiy it will be second largest shareholder with 6.5%

Hyderabad: In one of the biggest banking acquisitions in recent times, Kotak Mahindra Bank on Thursday bought Bangalore-based ING Vysya Bank in an all-share deal which is expected to consolidate its position in the market ahead of entry of new banks proposed by Reserve Bank of India (RBI).

Under the deal which is done at the share swap ratio of 2:2.5, ING Vysya shareholders will receive 725 shares in Kotak for 1,000 shares of ING Vysya. The transaction values ING Vysya, in which Dutch financial major ING owns 40 per cent stake, at about Rs 16,500 crore. The boards of the both banks approved the merger of the bank with Kotak Mahindra.

“This is a momentous occasion that brings together two banking institutions with significant complementary strengths. The opportunities and synergies that this merger will create will place Kotak and its incoming stakeholders from ING Vysya on a new trajectory of excellence and leadership,” said Uday Kotak, Executive Vice Chairman and Managing Director, Kotak Mahindra Bank, after announcing the acquisition.

The share swap 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, which is a 16 per cent premium ING Vysya market price in the similar period.

Post merger, Kota Mahindra Bank will become fourth largest private bank with a combined asset base of Rs 1.6 lakh crore and total branch network of 1,214. Its total deposits will stand at Rs 1.12 lakh crore and advances, at over Rs1 lakh crore.

“I firmly believe this merger will pave the way for a bigger and better financial services player with deep Indian roots and global standards of service. Kotak values the diversity of ING Vysya, and will work towards integrating them smoothly on this exciting journey that is ahead of us,” Uday Kotak added.

For Kotak which has deeper presence in West and North of the country with 641 branches, ING Vysya seems to be a good strategic fit given its widespread presence in South India with 573 branches in states like AP, Telangana and Karnataka.

“Our two companies are a perfect match at a perfect time. Our customers will see tremendous value from the combined entity as we fill the gaps, in terms of a much larger footprint and a complete product suite,” said Shailendra Bhandari, MD & CEO, ING Vysya Bank.

The merger is subject to the approval of the shareholders of Kotak and ING Vysya , RBI under the Banking Regulation Act, the Competition Commission of India and such other regulatory approvals as may be required.