Kotak Mahindra Bank Ltd., the fourth-largest private bank in India, announced on Thursday that it has struck a deal to acquire ING Vysya bank in an all-stock deal worth $2.4 billion or INR 15,000 crore.
Under the terms of the deal, for every 1000 shares worth INR 10 of ING Vysya bank, Kotak will pay 725 equity shares of INR 5. The transaction values ING Vysya's shares at INR 795 each, a 16 percent premium on the bank's monthly average share price.
The combined banking giant will have 1,214 branches with over 40,000 employees. The merged firm will also have assets worth over INR 2 lakh crore. Kotak will hold 34 percent of the merged entity while ING Group, the Dutch lender that owned 43 percent stake in ING Vysya, will hold 6.3 percent stake in the company.
The deal is subject to shareholder approval of both companies and also requires a regulatory nod from the Competition Commission of India (CCI) and the Reserve Bank of India.
"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," the two banks said in a joint press statement.
"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," Uday Kotak, Executive Vice-Chairman and Managing Director of Kotak said at a press conference.
"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," he added.
Experts said the merger was a brilliant deal as it would help improve Kotak's reach geographically and ING Vysya's portfolio would complement Kotak's retail and corporate banking strengths.
"This merger is good for the banking industry. This will give higher scale in terms of balance sheet size. Consolidation is needed in India. We need bigger banks. We hope, the government should also start consolidating public sector banks," HDFC's Deepak Parekh told The Economic Times.
The markets also reacted well to the deal. Kotak Mahindra's shares were up 6.39 percent and ING Vysya's went up 2.06 percent at the time of drafting the article.
