ICICI Bank has offered a swap ratio of 1:4.72 for the deal—25 shares of ICICI Bank for 118 shares of Bank of Rajasthan. This, said a release issued by ICICI Bank, “is based on an internal analysis of the strategic value of the proposed amalgamation.”
The swap ratio will value BoR at Rs 3,040 crore, which is double its current market cap. The board of BoR will meet on Sunday to take a call on the offer. PK Tayal, promoter of the bank, said the deal will unlock value in the bank for its shareholders. It is understood that chartered accountant & auditing firm Haribhakti & Co will conduct the due diligence and help finalise the share swap ratio.
As per Sebi data, the Tayal family holds more than 55% equity in BoR. In anticipation of the deal, shares of BoR had shot up 19.95% on the Bombay Stock Exchange, while ICICI fell 1.45%, on a day when the benchmark index remained flat. Over 1 crore BoR shares changed hands on BSE, compared to the two-week average of 40 lakh shares. The rise was also spurred by reports that auditing firm Deloitte Haskins & Sells, which recently submitted its interim report to the RBI, has given a clean chit to the bank, finding no significant irregularities in the bank’s books. The audit was ordered in March by RBI.
Prior to this, RBI had taken the unusual step of appointing a new MD& CEO G Padmanabhan for the bank, replacing PL Ahuja. Sebi too, in March this year banned 100 entities said to be related to the promoters of BoR for allegedly conniving to mislead investors about the shareholding pattern of the bank. After the closure of the market, BoR director Sanjay Kumar Tayal—also related PK Tayal—informed the BSE that the Tayals have entered into an agreement with ICICI for a proposal for amalgamation.
Salil Agarwal, associate director, PwC said: “With this merger, ICICI Bank will be able to expand its reach into Rajasthan. BoR has a very strong corporate presence in the region, which ICICI Bank will be able to leverage.” The acquisition will add 463 branches to the 2,000 ICICI Bank already has. 50% of these new branches are in Rajasthan. BoR had deferred its board meeting to May 28 to finalise its results, as some members of the board nominated by the RBI had sought more time to study the balance-sheet. Among the 16 directors of BoR, five are RBI nominees.
Established in 1943, BoR has a customer-base of over 20 lakh. In the third quarter of 2009-10, the bank’s net profit declined to Rs 44.7 crore as against Rs 49.21 crore in the year-ago period, while its total income dropped to Rs 373.7 crore from Rs 419.8 crore. Post-amalgamation, ICICI Bank is expected to have a turnover of over Rs 4 lakh crore.