The proposed Rs 15,000-crore merger deal between Kotak Mahindra Bank (KMBKY, Financial) and ING Vysya has got a green signal. Kotak Mahindra had announced the buyout of ING Vysya Bank in an all-stock deal in November last year and it had approached CCI for approval on the deal in December.
Competition Panel approves Kotak purchase of ING Vysya Bank. Kotak Mahindra Bank Ltd. proposed acquisition of ING Vysya Bank Ltd. Through an all stock merger has received an approval. While Kotak announced the deal has been approved by 99 % of its Public shareholders, ING could only manage to get approval of 89% of the Public shareholders’. They announced the deal worth over $2.4 billion. The Competition Commission of India (CCI) said the proposed merger was not likely to have an adverse impact on competition in banking and allied services. The proposed deal is the first major bank takeover. The top privately held lender ICICI Bank (IBN, Financial) bought Bank of Rajasthan more than four years ago and they have precedence in the merger and acquisition platform.
Brighter side of the merger
On the greener side shares of both the banks Kotak Mahindra Bank and ING Vysya Bank rose by 2% each in trading market, which means, “They have already started to reap the profit. With reference to investment advisory services, it is also said, since ING Vysya does not have significant market share in any of the relevant markets, "the proposed combination would not result in the removal of a significant competitor." The market value of shares of the parties is "insignificant in comparison to the other larger players present in the markets."
Shareholders’ approval of Kotak purchase of ING Vysya Bank
There may be a problem. Shareholders of ING are not very satisfied with the prices proposed. They are also quoting difficulties that would be faced if the ING shareholders do not agree or they feel that the swap ratio is not right and therefore, they are not getting a good bargain. Nothing prevented both parties to have held their shared in three or four different entities, But we still have to ask if there is a reason behind the matter being overlooked?
At the same front Kotak Mahindra Bank Ltd. held general body meeting in first week of January at Mumbai to seek approval of its shareholders. Kotak assured its shareholders a share exchange ratio of 725 equity shares. This was hence approved by 99.30 % of shareholders present. The merger is though subject to approval of Reserve Bank of India and Competition Commission of India.
Kotak Bank had shown a tremendous high of 2.7 per cent at Rs. 1,305 where as ING bank ends at 2.9 per cent at Rs. 904. Meanwhile, The Sensex has gained 2269 points at 227,176.
As soon the banks obtain all the approvals, the merger will be effective and announced as successful venture. With this effect all ING Vysya branches and staff will be taken over by Kotak Bank ltd. The combined Kotak will have 1214 branches approximately, with its network spread pan-India. Substantial efficiencies will be propagated out of the proposed merger. This most likely will result in significant benefits for all stakeholders, employees or customers, ultimately benefiting the banking industry as a whole. ING group and Kotak are looking forward to this merger in order to explore areas of cooperation in across business lines. On the basis of merger framework, they have entered into an agreement for all future cooperation and mutual agreement on specific terms of business following all the laws and guidelines.
“The merger will create a huge chunk of opportunities and synergies for its incoming shareholders from ING Vysya Bank. They will also be able to witness the excellence and the leadership by Kotak Mahindra Bank.
Parting words
This is definitely going to strike the opportunity by paving a way for bigger and better financial services player with deep rooted Indian values and global standards of service.” Kotak gives a warm welcome to ING Vysya and its diversity to its family.
