Kotak Mahindra Bank on Thursday announced the merger of ING Vysya Bank with itself, subject to shareholder approval.
The merger makes Kotak Mahindra the fourth largest private sector bank in the country after ICICI Bank, HDFC Bank and Axis Bank.
Earlier in the day, shares of both banks rallied by up to 6% in early trade on BSE on reports that Kotak was in the final stages of buying ING Vysya. Kotak shares closed at Rs 1157.05, up 7.28% while ING Vysya shares closed 7.15% higher at Rs 814.20.
The merger, which was approved by the Kotak Mahindra board Thursday, envisages a 725:1000 share swap ratio, meaing that shareholders of ING Vysya will receive 725 shares of Kotak Mahindra stock for every 1000 shares of ING Vysya.
Shares of Kotak Mahindra carry a face value of Rs 5, while those of ING Vysya have a face value of Rs 10.
“I am excited to announce the merger of Kotak Mahindra Bank & ING Vysya Bank, subject to approvals. We will work to create stakeholder value,” Uday Kotak tweeted.
Following the merger, Kotak Mahindra’s branch strength will double to 1,200. Currently, two-thirds of ING Vysya Bank’s branches are in South India whereas Kotak is largely based in the western part of the country.
In terms of portfolio complemetarity, half of Kotak’s loans are retail, while 38% of ING’s loans are to small and medium enterprises
The merger does not fall within the purview of related party transaction, Kotak Mahindra Bank said in a statement.
A report from Espirito Santo securities earlier in the day had said that the merger would be a good fit for Kotak Mahindra bank, based on an evaluation of access to liabilities and customer base, access to new products/talent and the opportunity to expand to new geographies.