The Board of Directors of
Kotak Mahindra Bank Ltd and the Board of Directors of ING Vysya Bank Ltd at
their respective meetings held on Thursday have approved an all-stock
amalgamation of ING Vysya with Kotak.he amalgamation is subject to the approval
of the shareholders of Kotak and ING Vysya respectively, RBI under the Banking
Regulation Act, the Competition Commission of India and such other regulatory
approvals as may be required.
Upon obtaining all approvals,
when the merger becomes effective, ING Vysya will merge with Kotak.
Shareholders of ING Vysya will receive shares of Kotak in exchange of shares in
ING Vysya at the approved share exchange (“swap”) ratio. All shareholders of
Kotak and ING Vysya will participate thereafter in the (merged) Kotak business.
All ING Vysya branches and employees will become Kotak branches and employees. ING
Vysya’s CEO designate, Mr Uday Sareen, will be inducted into the top management
of Kotak reporting directly to Mr Uday Kotak, Executive Vice Chairman and
Managing Director of Kotak.
Merger terms
The Boards of Kotak and ING
Vysya respectively considered the results of a due diligence review covering
areas such as advances, investments, deposits, properties & branches,
liabilities, material contracts etc.S.R.Batliboi & Co., LLP, Chartered
Accountants, and Price Waterhouse & Co LLP, the independent valuers
appointed by Kotak and ING Vysya respectively, have recommended a share
exchange ratio, which has been accepted by the respective Boards. Avendus Capital Private Ltd. provided a
Fairness Opinion to Kotak on the share exchange ratio and Edelweiss Financial
Services Ltd. provided a Fairness Opinion to ING Vysya.Accordingly ING Vysya
shareholders will receive 725 shares in Kotak for 1,000 shares of ING Vysya.
The share exchange ratio is considered fair and reasonable given the underlying
value of ING Vysya, as also giving shareholders the ability to benefit from the
potential that can be realised upon merging into Kotak.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,
which is a 16% premium to a like measure of ING Vysya market price.
The proposed merger would
result in issuance of approximately 15.2% of the equity share capital of the
merged Kotak. One of ING Vysya’s directors will be joining the Board of
Directors of Kotak.Strategic Rationale and benefitsKotak, with 641 branches and
relatively deeper presence in the West and North, has a differentiated
proposition for various customer segments including HNIs, deep corporate relationships
including emerging corporates, a wide product portfolio, including agricultural
finance and consumer loans, and a robust capital position.
ING Vysya has a strong
customer franchise for over 8 decades, with a national branch network of 573
branches and deep presence in South India, particularly in Andhra Pradesh,
Telengana and Karnataka. ING Vysya has a large customer base across all
segments. It is particularly noted for a best-in-class SME Business, as also
for serving large international corporates in India by access to the
international relationships of ING Group.
The combined Kotak will have
1,214 branches, with a wide-spread pan-India network, getting both breadth and
depth given the strong geographic complementarity between Kotak and ING Vysya.
Substantial efficiencies will
arise out of the proposed merger, which is likely to result in significant
benefits for all stakeholders, be it shareholders, employees or customers, and
ultimately the banking industry:
* Customers and employees will benefit
from the combined Kotak having a wider geographical spread, expertise across
customer segments, such as SME, HNI, Corporates, and on products such as
private banking, asset management, insurance, investment banking, NRI offerings
etc.
* Kotak’s strong capital position potentially
avoids capital raising and attendant dilution in the near to medium term for
ING Vysya shareholders.
* Additionally, with ING Vysya nearing
the cap for foreign shareholding, the merger would yield more liquidity with
significant foreign headroom in Kotak even after merger, with foreign
shareholding at ~47%.Commenting on the
announcement, Mr Uday Kotak, Executive Vice Chairman and Managing Director,
Kotak Mahindra Bank, said – “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. 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, welcomes them as its family,
and will work towards integrating them smoothly on this exciting journey that
is ahead of us.”Commenting on the
announcement, Mr. Shailendra Bhandari, presently MD & CEO of ING Vysya Bank
Ltd, said -- “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, both
national and international. Together, both companies will participate in the
growth of one of India’s strongest and most successful banking franchises.”
ING Vysya’s CEO designate, Mr.
Uday Sareen, said - "This is a
historic day in our 84 year heritage. I truly believe that 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. The
combination creates a company that will deliver maximum value for our
shareholders, enormous opportunities for employees and deliver the entire suite
of financial products and services to our customers.”Employees Kotak has been rated among the
best employers in the country and is renowned for its employee orientation and
retention of talent. ING Vysya has a diverse set of employees, who have
expertise in dealing with different customer segments. The combined entity will
generate ample career opportunities for staff as well as a wider array of
products to serve their customers, aided by management development
opportunities across different businesses of Kotak Group.
Both organizations have strong
cultures and employee best practices and the combined entity will work towards
imbibing these and building a world-class organization.ING Group and Kotak intend to
explore areas of cooperation in cross border business, on the basis of a
Framework for Future Cooperation that has been entered into, subject to mutual
agreement on specific terms and all laws and regulations.In addition to the experts who
undertook valuation and issued fairness opinions, Ernst & Young LLP
undertook due diligence review of ING Vysya for Kotak, and Amarchand &
Mangaldas were legal advisors to Kotak. PricewaterhouseCoopers Private Limited
carried out due diligence for ING Vysya and AZB & Partners were ING Vysya’s
legal advisors.
