Merger Reports of ING Vysya Bank and Kotak Mahindra Bank Put Kotak on a 52-Week Peak
Kotak Mahindra Bank and ING Vyasa bank both achieved a 52-week high on BSE in intraday trade last week. They are now on a roll-on Dalal Street.
Economic Times, a popular economic daily also reported that Kotak Mahindra may finally takeover ING Vyasa Bank. The deal would be at a 2:2.5 ratio. And it would be valued at Rs 16,500 crore.
Responding to this news of takeover, 7.57 percent was brought out by Kotak Mahindra Bank, in the intraday trade to arrive at its 52-week peak of Rs 864.80.
Post noon, at 12:40 p.m.; ING Vysya Bank was at Rs 838.00 which amounts to a 10.28 percent raise. On the other hand, Kotak Mahindra Bank was at Rs 1,151.80, rising 6.80 percent.
Things became confusing by a statement made by Kotak Mahindra bank on Thursday morning that “no decision has been made by the bank in relation to any merger or acquisition transaction” at the exchange.
Further, Kotak Mahindra Bank also stated while filing that “if the bank takes a decision to undertake such a transaction, the same being unpublished price sensitive information, the bank shall make a disclosure in accordance with clause 36 of the listing agreement”.
Affirmations about this merger announcement have been given by the analysts at top brokerage firms remain. They perceive it as a big positive move for Kotak Mahindra Bank as the merger will also provide them with access to ING’s SME platform.
Nomura said in a report that if such a merger occurs between Kotak Mahindra Bank and ING Vysya, it will be an example of a happy marriage as this would help Kotak Mahindra Bank to advantageously fill various gaps for Kotak.
As per the brokerage, this possession of ING Vysya is bound to increase the number of branches from 600 branches in FY14 to 1,200 branches, thus adding to the total number of Kotak Mahindra’s branches.
There is a strong possibility that the branch overlap will be very low except in the metro cities as ING Vysya has around 66 percent of its branches in South India while Kotak Mahindra Bank has 68 percent of its branches in the Western and Northern part of India.
This deal will also bestow to the Kotak Mahindra Bank BSE 7.04 % access to ING’s SME platform. ING Vysya’s key strength lies with SME which is roughly 38 percent of the loans.
The Nomura report also said that “With Kotak trading at ~4x FY15F book, ING Vysya’s acquisition at ~2.2x will be highly EPS and book-accretive – at these valuations, the deal will be 7-8 percent EPS-accretive and +10% book-accretive”.
The brokerage has given a ‘Neutral’ rating on the stock and with a target price of Rs 1,050.