Description
ICICI Bank accquisition of Bank of Rajasthan
ACQUISITION OF BANK OF RAJASTHAN BY ICICI BANK
ICICI BANK
ICICI bank is the India's second largest bank with total asset of Rs.3,634.00 billion at march 31st 2010, and profit after tax of Rs. 40.25 billion for the year ended march 31st 2010 ? The bank has network of 2,035 branches and about 5,518 ATM’s in India and presence in 18 countries, ICICI bank offers a wide range of services to corporate and retail customers through a variety of delivery channels and through its specialized subsidiaries in the area of Investments, Banking, Life & Non-Life insurance, Venture capitalist and Asset management.
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BANK OF RAJASTHAN
Bank of Rajasthan, with its strong hold in the state of Rajasthan has a nationwide presence serving its customers with a mission of “Together we prosper”, Engaging actively in commercial banking, Merchant banking, auxiliary services, customer banking, trust & custodian services, international banking. ? At march 31st 2009 BOR had 463 branch and 111 ATMs, total asset of Rs. 172.24 billion, deposit of Rs. 77.81 billion, it made a net profit of 1.18 billion in the year ended march 31,2009 and at a net loss of 0.10 billion in the nine month ended December 31,2009
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WHY BANK OF RAJASTHAN
ICICI bank Ltd, India’s largest private sector bank , said it agreed to acquire smaller rival Bank of Rajasthan Ltd to strengthen its presence in northern and western India . ? Deal would substantially enhance its branch network and it would combine Bank of Rajasthan branch franchise with its strong capital base . ? The deal , which will give ICICI a sizeable presence in the northwestern desert state of Rajasthan , values the small bank at about 2.9 times its book value, compared with an Indian Banking sector average of 1.84 . ? ICICI Bank may be killing a two birds with one stone through its proposed merger of the Bank of Rajasthan. Besides getting 468 branches, India’s largest private sector bank will also get control of 58 branches of a regional rural bank by BOR
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NEGATIVES
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The negatives for the ICICI Bank are the potential risk arising from BoR non-performing loans and the BoR is trading at expensive valuations.
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As on FY-10 the net worth of BOR was approximately Rs 760 crore and that of ICICI Bank of Rs 5,17,000. for the December 2009 quarter, BOR reported a loss of Rs 44 crore on an income of Rs 373 crore.
DEAL VALUATION
ICICI Latest Markt Cap Branches ATM No-of Employee CAR 99,125 2,035 5,518 34,596 19.4% BOR 1,471 4,63 111 4,075 11.3%
•SWAP Ratio 25 share of ICICI bank for 118 share of BOR •Branch network of ICICI bank to cross 2500 •BOR Mkt cap currently 1.55% of ICICI bank •Third Acquisition for ICICI bank after Sangli bank & Madura bank.
INFORMATION
The boards of both banks, have agreed in principle approval for the acquisition in may 2010. ? The productivity of ICICI bank is high compared to Bank of Rajasthan. ICICI recorded a business per branch of 3 billion rupee compared with 47 million rupees of BOR for fiscal 2009 ? But the non-performing assets (NPA) record for BOR is better than ICICI bank. For the quarter ended Dec 2009, BOR recorded 1.05 % of advances as NPA’s which is better than 2.1% recorded by ICIC bank.
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TYPE OF ACQUISITION
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This is a Horizontal Acquisition in related functional area in same industry (banking) in order to acquire assets of a non performing company and turn it around by better management achieving inorganic growth for self by access to 3 million customers of BOR and 463 branches
ACQUISITION MOTIVE-INORGANIC GROWTH
Since 1997, ICICI Bank has acquired smaller banks to increase its branch ? 1997-Acuired ITC classic finance ? 1998-Acuired Anagram finance ? 2000-Acuired the Bank of Madura ? 2005-Acuired Russia’s investitsionnokreditny Bank ? 2007-Acuired sangli Bank
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PROCESS OF ACQUISITION
? Haribhakti
& Co was appointed jointly by both the banks to access the valuation ? SWAP ratio of 25:118 (25 shares of ICICI for 118 shares of bank of Rajasthan) i.e. one ICICI bank share for 4.72 BOR shares ? Post-Acquisition, ICICI Bank’s branch network would go up to 2,463 from 2000.
PROCESS OF ACQUISITION
The NPA recorded for BOR is better than ICICI bank. For the quarter ended Dec 09, BOR recorded 1.05% of advances as NPA’s, which is far better than 2.1 % recorded by ICICI bank. ? The deal, entered into after the due diligence by Deloitte, was found satisfactory in maintenance of accounts and no carry of bad loans.
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LEGAL PROBLEM- EGM-KOLKATA CIVIL COURT
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Extraordinary general meeting that was called to approve the merger was first cancelled after a Kolkata civil court restrained the management from holding the EGM, This was based on a complaint filed by a shareholder who was against the merger.
LEGAL PROBLEM-UNION STRIKE
Three major employee unions of BOR-All India Bank of Rajasthan Employees Federation. All India bank of Rajasthan Officer’s Association and Akhil Bhartiya Bank of Rajasthan Karmachari Sangh, had called the strike demanding the immediate termination of the ICICI-BOR merger proposal ? The United Forum of Bank of Rajasthan Unions had opposed the merger of BOR with ICICI Bank, citing cultural compatibility issues.
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LEGAL ISSUE
The Rajasthan High court issued notices to the reserve bank of India, Bank of Rajasthan (BOR), ICICI bank and others on a petition filed by an employees union of the Udaipur-based BOR against its proposed merger with ICICI bank. ? The petition claims that BOR board on 18 May2010 to merge with ICICI Bank was illegal as the securities and exchange board of India had found out that the Toyals had acquired 55.1% equity in the bank in violation of its regulation.
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POST MERGER
HR ISSUES ? RISK OF DETERIORATION OF QUALITY OF ASSET ? LEVERAGE AND SYNERGY • revenue enhancement • economies of scale • technological leverage • forward and backward integration.
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KEY RATIO POST-MERGER
Total asset increased 11.8% from 3,634 31st Mar 2010 to 4,062 31st Mar 2011. ? CASA increased from 842 billion to 1016.47 billion
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Year Ended Mar 31, 2009
Gross NPA 98.03
Mar 31,2010 Mar 31,2011
96.27 101.14
Increase in NPA is due to from Acquisition of BOR which contributes 4.11 billion
doc_849960558.pptx
ICICI Bank accquisition of Bank of Rajasthan
ACQUISITION OF BANK OF RAJASTHAN BY ICICI BANK
ICICI BANK
ICICI bank is the India's second largest bank with total asset of Rs.3,634.00 billion at march 31st 2010, and profit after tax of Rs. 40.25 billion for the year ended march 31st 2010 ? The bank has network of 2,035 branches and about 5,518 ATM’s in India and presence in 18 countries, ICICI bank offers a wide range of services to corporate and retail customers through a variety of delivery channels and through its specialized subsidiaries in the area of Investments, Banking, Life & Non-Life insurance, Venture capitalist and Asset management.
?
BANK OF RAJASTHAN
Bank of Rajasthan, with its strong hold in the state of Rajasthan has a nationwide presence serving its customers with a mission of “Together we prosper”, Engaging actively in commercial banking, Merchant banking, auxiliary services, customer banking, trust & custodian services, international banking. ? At march 31st 2009 BOR had 463 branch and 111 ATMs, total asset of Rs. 172.24 billion, deposit of Rs. 77.81 billion, it made a net profit of 1.18 billion in the year ended march 31,2009 and at a net loss of 0.10 billion in the nine month ended December 31,2009
?
WHY BANK OF RAJASTHAN
ICICI bank Ltd, India’s largest private sector bank , said it agreed to acquire smaller rival Bank of Rajasthan Ltd to strengthen its presence in northern and western India . ? Deal would substantially enhance its branch network and it would combine Bank of Rajasthan branch franchise with its strong capital base . ? The deal , which will give ICICI a sizeable presence in the northwestern desert state of Rajasthan , values the small bank at about 2.9 times its book value, compared with an Indian Banking sector average of 1.84 . ? ICICI Bank may be killing a two birds with one stone through its proposed merger of the Bank of Rajasthan. Besides getting 468 branches, India’s largest private sector bank will also get control of 58 branches of a regional rural bank by BOR
?
NEGATIVES
?
The negatives for the ICICI Bank are the potential risk arising from BoR non-performing loans and the BoR is trading at expensive valuations.
?
As on FY-10 the net worth of BOR was approximately Rs 760 crore and that of ICICI Bank of Rs 5,17,000. for the December 2009 quarter, BOR reported a loss of Rs 44 crore on an income of Rs 373 crore.
DEAL VALUATION
ICICI Latest Markt Cap Branches ATM No-of Employee CAR 99,125 2,035 5,518 34,596 19.4% BOR 1,471 4,63 111 4,075 11.3%
•SWAP Ratio 25 share of ICICI bank for 118 share of BOR •Branch network of ICICI bank to cross 2500 •BOR Mkt cap currently 1.55% of ICICI bank •Third Acquisition for ICICI bank after Sangli bank & Madura bank.
INFORMATION
The boards of both banks, have agreed in principle approval for the acquisition in may 2010. ? The productivity of ICICI bank is high compared to Bank of Rajasthan. ICICI recorded a business per branch of 3 billion rupee compared with 47 million rupees of BOR for fiscal 2009 ? But the non-performing assets (NPA) record for BOR is better than ICICI bank. For the quarter ended Dec 2009, BOR recorded 1.05 % of advances as NPA’s which is better than 2.1% recorded by ICIC bank.
?
TYPE OF ACQUISITION
?
This is a Horizontal Acquisition in related functional area in same industry (banking) in order to acquire assets of a non performing company and turn it around by better management achieving inorganic growth for self by access to 3 million customers of BOR and 463 branches
ACQUISITION MOTIVE-INORGANIC GROWTH
Since 1997, ICICI Bank has acquired smaller banks to increase its branch ? 1997-Acuired ITC classic finance ? 1998-Acuired Anagram finance ? 2000-Acuired the Bank of Madura ? 2005-Acuired Russia’s investitsionnokreditny Bank ? 2007-Acuired sangli Bank
?
PROCESS OF ACQUISITION
? Haribhakti
& Co was appointed jointly by both the banks to access the valuation ? SWAP ratio of 25:118 (25 shares of ICICI for 118 shares of bank of Rajasthan) i.e. one ICICI bank share for 4.72 BOR shares ? Post-Acquisition, ICICI Bank’s branch network would go up to 2,463 from 2000.
PROCESS OF ACQUISITION
The NPA recorded for BOR is better than ICICI bank. For the quarter ended Dec 09, BOR recorded 1.05% of advances as NPA’s, which is far better than 2.1 % recorded by ICICI bank. ? The deal, entered into after the due diligence by Deloitte, was found satisfactory in maintenance of accounts and no carry of bad loans.
?
LEGAL PROBLEM- EGM-KOLKATA CIVIL COURT
?
Extraordinary general meeting that was called to approve the merger was first cancelled after a Kolkata civil court restrained the management from holding the EGM, This was based on a complaint filed by a shareholder who was against the merger.
LEGAL PROBLEM-UNION STRIKE
Three major employee unions of BOR-All India Bank of Rajasthan Employees Federation. All India bank of Rajasthan Officer’s Association and Akhil Bhartiya Bank of Rajasthan Karmachari Sangh, had called the strike demanding the immediate termination of the ICICI-BOR merger proposal ? The United Forum of Bank of Rajasthan Unions had opposed the merger of BOR with ICICI Bank, citing cultural compatibility issues.
?
LEGAL ISSUE
The Rajasthan High court issued notices to the reserve bank of India, Bank of Rajasthan (BOR), ICICI bank and others on a petition filed by an employees union of the Udaipur-based BOR against its proposed merger with ICICI bank. ? The petition claims that BOR board on 18 May2010 to merge with ICICI Bank was illegal as the securities and exchange board of India had found out that the Toyals had acquired 55.1% equity in the bank in violation of its regulation.
?
POST MERGER
HR ISSUES ? RISK OF DETERIORATION OF QUALITY OF ASSET ? LEVERAGE AND SYNERGY • revenue enhancement • economies of scale • technological leverage • forward and backward integration.
?
KEY RATIO POST-MERGER
Total asset increased 11.8% from 3,634 31st Mar 2010 to 4,062 31st Mar 2011. ? CASA increased from 842 billion to 1016.47 billion
? ?
Year Ended Mar 31, 2009
Gross NPA 98.03
Mar 31,2010 Mar 31,2011
96.27 101.14
Increase in NPA is due to from Acquisition of BOR which contributes 4.11 billion
doc_849960558.pptx