ICICI Bank-BoR merger swap ratio fixed at 25:118

ICICI Bank entered into an agreement with the Tayal family to merge Bank of Rajasthan (BoR) with it. A decision to this effect was taken on May 18 by both the banks. According to ICICI Bank, the share swap ratio has been fixed at 25 shares for 118 shares of BoR. This is based on an internal analysis of the strategic value of the proposed amalgamation, average market capitalization per branch of old private sector banks and relevant precedent transactions, ICICI Bank said in a statement. "The proposed amalgamation would substantially enhance branch network and presence in northern and western India," ICICI Bank said. At the proposed share swap ratio, the indicative price for BoR works out to about Rs188.42 per share, which reflects a premium of 89% to the latter's closing stock price on May 18. The deal values BoR at about 2.9 times its book value, compared with the industry average of 1.84. BoR's board has approved the deal, which will be subject to regulatory clearances. It's board will meet again on May 23 to discuss the ICICI Bank offer. ICICI Bank has started a due diligence exercise on BoR.

"An in-principle approval has been taken to amalgamate the bank with ICICI Bank. The majority shareholder is looking at swapping his official shareholding of 28.60% with ICICI Bank shares. Other details on valuation and share swap will be decided on May 24," said BoR MD & CEO G. Padmanabhan. He was appointed by RBI, after the central bank slapped Rs2.5mn fine on BoR for alleged violation of various norms. These included irregularities in transactions and misrepresentation of documents, norms pertaining to anti-money laundering, Know Your Customer and irregularities in the conduct of accounts of a corporate group. The RBI also appointed Deloitte Haskins & Sells to conduct a special audit of the bank, which recently submitted its interim report to the central bank. In March, SEBI banned 100 entities, including Tayal Group firms from all stock market-related activities for fraudulently hiking the promoter holding in Bank of Rajasthan, while conveying the impression they were reducing their shareholding. Though BoR promoters say they hold a 28.60% stake in the bank, SEBI has put the promoter shareholding at 55.01%.