Kotak Bank buys ING Vysya for Rs 15,000 cr in biggest merger

Mumbai: In India’s biggest banking merger, private sector lender Kotak Mahindra Bank on Thursday announced the buyout of ING Vysya Bank in an all-stock deal valued at Rs 15,000 crore, which is likely to set off consolidation moves ahead of the entry of new players.

“This is a momentous occasion for Kotak Mahindra Bank, and ING Vysya Bank and the country’s financial sector as a whole. We are truly excited about our lives together,” Uday Suresh Kotak, Executive Vice-Chairman and Managing Director of Kotak Mahindra Bank said at a late evening press conference.

The all-stock deal values ING Vysysa stock at Rs 790 a share, which is a 16 per cent premium to the 30-day stock price as of November 19, while pegging Kotak Bank at Rs 1,119 a share in similar manner. Accordingly, ING shareholders will get 725 Kotak Bank shares for 1000 shares of the Bangalore based lender. This values ING Vysya Bank at Rs 15,033 crore.

Post-deal, ING Groep NV will hold 6.5 per cent in the combined entity, while Kotak promoters stake will be diluted to 34 per cent from 40.12 per cent.

By December 2016, Kotak has to bring down his stake 30 per cent as per RBI norms. We will now have time till December 2016 to trim promoter holding down to 30 per cent, Kotak said.

With 6.4 per cent stake in Kotak Bank, ING will be the second largest stakeholder. The merger will result in Kotak Bank issuing 16.5 per cent additional shares.

The Dutch promoter holds around 43 per cent in ING bank, and based on ING Vysya’s book value as of Sept 30, ING will book a net profit of about USD 188 million from the deal, according to analysts.

All ING branches, will become Kotak Mahindra Bank branches post-merger and all the ING employees numbering around 10,000 will come to the Kotak Bank’s rolls. The new entity will have 1,214 branches and 1,794 ATMs.

The combined bank will have a total asset of close to Rs 2 trillion and a market capitalization of around Rs 1 trillion at today’s closing price.

Shares of Kotak Bank rose over 7 per cent and ING Vysya over 5 per cent.

Last merger in the private banking space took place when ICICI Bank was nudged by the government and the RBI to take over Bank of Rajasthan in 2010. Prior to that Centurion Bank was merged with HDFC Bank in 2008, and Global Trust Bank was taken over by the state-run Oriental Bank of Commerce in 2001-in distress moves.