Kotak Mahindra Bank on Thursday announced a $2.4 billion all-share deal to acquire its smaller peer ING Vysya. Kotaks takeover of ING Vysya is the first major deal in four years and the transaction is expected to close in the second half of 2015. Shares in the two lenders hit record highs for a second successive session on Friday. Here are 10 facts to know about the deal: 1) Kotak Banks takeover of ING Vysya is the biggest deal in Indias banking sector and will create the countrys fourth largest private sector lender by branch network. The combined banking entity will have 1,214 branches with a widespread network across the country. Most of ING Vysyas branches are in South India, while Kotaks branches are concentrated in West and North India. 2) The merged entity will have nearly 40,000 employees and assets of nearly Rs 2 lakh crore. In 2013-14, the profit of Kotak Bank and ING Vysya totaled nearly Rs 3,100 crore. 3) ING Vysya shareholders will get 725 Kotak Bank shares for every 1000 shares they hold in the lender. The share exchange ratio indicates a price of Rs 790 for each ING Vysya share. That compares to ING Vysyas closing price of Rs 816.95 on Thursday. 4) Kotaks stake will come down from 40 per cent to 34 per cent in the merged entity. Dutch lender ING Group NV will become the second-largest shareholder in the merged entity with a 6.5 per cent stake. ING Group currently owns a 43 per cent stake in ING Vysya. 5) Most experts have given thumbs up to the deal and the merger will complement the lenders businesses. Kotaks loan portfolio comes from urban retail, while ING Vysyas key strength is in SME/business banking. Macquarie says ING Vysya was an ideal target for Kotak Bank, while Nomura termed the merger as a happy marriage. 6) Kotak Mahindras bolstered balance sheet and expanded branch network will put it in a better position to tap a pickup in demand for credit from Indian corporates and individuals in the near future, analysts said. The merged bank will also leverage INGs network to tap international business. 7) Valuation wise, the deal appears attractive, analysts say. The Kotak-ING deal has taken place at a price/book value ratio of 2.1 times. In 2010, ICICI Bank-Bank of Rajasthan merger was at 5 times price/book value ratio. HDFC Banks takeover of Centurion Bank of Punjab was valued at 6.8 times. 8) Kotak-ING deal may be the start of long-awaited consolidation in Indias crowded banking sector, analysts say. The country has 40 publicly traded banks, 24 of them majority owned by the government. The state banks account for over 70 per cent of a total of $1 trillion advances, leaving dozens of small lenders in their wake with tiny market shares. 9) Analysts expect the sector to begin coalescing around a few major players after the countrys central bank in April granted licences to set up two new banks. Deals, though, have been rare in a banking industry hampered by restrictive regulation, reluctant investors and strong unions. 10) Kotak Bank shares jumped as much 9.3 per cent to a record high of Rs 1,264.70 in morning trade. ING Vysya shares also hit a record high of 864.80.
Posted on: Fri, 21 Nov 2014 05:07:58 +0000
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