M & a Presentation Icici Bor Final

8/4/2019 M & a Presentation Icici Bor Final

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MUMBAI INSTITUTE OFMANAGEMENT AND

RESEARCH( M I M R )


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v Presented By:

Ankur Gupta 1029

Tejal Bidoo 1011

Daksha Jogadia 1036

Krutanjali Pawar 1059

Priya choudhary 1014

Dhiren Rathod 1087

A PRESENTATION ON MERGER & ACQUISITIONIN BANKING SECTOR.


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v Mergers and acquisitions (M&A)

Mergers and acquisitions (M&A) refers to the aspect of corporate strategy, corporatefinance and management dealing with the buying, selling, dividing and combining ofdifferent companies and similar entities that can aid, finance, or help an enterprise growrapidly in its sector or location of origin or a new field or new location without creating a

subsidiary, other child entity or using a joint venture.

Merger is a combination of two companies to form a new company.

Acquisition is the purchase of one company by another in which no new company

is formed.


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The dominant rationale used to explain M&A activity is that acquiring firms seek improved financial

performance. The following motives are considered to improve financial performance:

Economy of scale ,

Economy of scope ,

Increased revenue or market share ,

Cross-selling ,

Synergy ,

Taxation ,

Resource transfer ,

v Motives behind M&A


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v Global Comparison

Rank Bank Total Assets ($bn)

1 BNP Paribas 2,965

2 Royal Bank of Scotland Group 2.750

3 Crdit Agricole 2,441

4 HSBC Holdings 2,364

5 Barclays 2,235

6 Bank of America Corp 2,223

7 Deutsche Bank 2,162

8 JP Morgan Chase 2,032

9 Mitsubishi UFJ Financial Group 2,026

10 Citigroup 1,857

68 State Bank of India 279

111 ICICI Bank 103

Source: The Banker Top 1000 World Banks2010

Top 200 No. of Banks

USA 27Japan 18

Germany 15

China 13

Spain 13

India 3

Top 1000 No. of Banks

USA 183

Japan 102

China 84

Germany 72

Spain 41Switzerland 37

India 31


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Megabanks

Medium sized banks

Smaller banks

v Indian Banking Industry structure

M&As essential for creation of Megabanks

M&As among mid and smaller sized bankswill drive efficiency and growth

Mega banks will be able to supportindustry in global expansion

Regulatory framework should allow forinorganic growth especially among privateand foreign banks

Industry structure will help alignment of customer segmentsand services


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Banking Companies (Acquisition & Transfer of Undertakings) Act 1970

Section 9 empowers the govt. to make the scheme to carry out the following:

Capital structure of corresponding new bank

Constitute the board of directors

Reconstitution of a new bank into two or more corporations or amalgamation of any newbank with any other new bank

Companies Act 1956

Approval of the board of directors of individual companies for the draft proposal

Application in High Court

Approval of shareholders by 75% majority

Sanction by the High Court

Filing of the court order with the Registrar of Companies

vRegulatory Framework


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RBI Guidelines for merger/ amalgamation of private sector banks

Decision of merger has to be approved by 2/3rd of the total Board of the respectivecompanies. Applicable to PSU banks also.

Amalgamation between two banking companies

Approval by shareholders with 2/3 majority After approval the scheme should be submitted to RBI


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Date ofmerger

Acquirer bank Target bank

Assets of

target bankas % ofacquiring

banks assets

Number ofbranches oftarget bank

August 2010 ICICI Bank Bank of Rajasthan 0.05 463

February 2008 HDFC Bank Centurion Bank of Punjab 20 394

August 2007 Centurion Bank of Punjab Lord Krishna Bank 11 110

April 2007 ICICI Bank Sangli Bank 0.5 190

March 2007 Indian Overseas Bank Bharat Overseas Bank 6 102

October 2006 IDBI United Western Bank 8 230

September 2006 Federal Bank Ganesh Bank of Kurundwad 1 32

October 2005 Centurion Bank Bank of Punjab 106 136

August 2004 Oriental Bank of Commerce Global Trust Bank 17 104

February 2003 Punjab National Bank Nedungadi Bank 2 173

March 2001 ICICI Bank Bank of Madura 36 350

February 2000 HDFC Bank Times Bank 75 39

v Acquisitions over the lastdecade


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This is a horizontal acquisition in related functionalarea in same industry(banking) in order to acquireassets of a non-performing company and turn it around

by better management and achieving inorganic growth

for self by access to 30 lakhs customers of BoR and463 branches.

v Type of Acquisition


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ICICI Bank is Indias second largest bank with total assets of Rs. 36340.0Crore on March 31,2010 and profit after tax Rs.402.5 Crore for the yearended March 31,2010.

The bank has a network of 2,035 Branches and about 5518 ATMs in indiaand present in 18 countries. ICICI Bank offers a wide range of bankingproducts and financial services to corporate and retail customers through averity of delivery channels and through its specialized subsidiaries in thearea of investment banking, Life, and Non life insurance, Venture capitaland asset management.

v ICICI Bank


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Since 1997, ICICI Bank has acquired smaller banks to increase its reach

1997 Acquired ITC Classic Finance

1998 Acquired Anagram Finance

2000 Acquired with the Bank of Madura

2005 Acquired Russias InvestitsionnoKreditny Bank

2007 Acquired Sangli Bank

v Acquisition Motive -Growth


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Bank of Rajasthan, with its stronghold in the state of Rajasthan, has anationwide presence, serving its customers with the mission of togetherwe prosper engaging actively in Commercial Banking, Deposit & MoneyPlacement Services, Trust & Custodian services, International Banking,Priority Sector Banking.

At March 31, 2009; Bank of Rajasthan had 463 branches and 111 ATMs,total assets of Rs.1722.4 crores, deposits of Rs. 1518.7 crores andadvances of Rs.778.1 crores. It made a net profit of Rs. 11.8 crores in theyear ended March 31, 2009 and net loss Rs. 1 crores in the nine monthsended December 31,2009.

v Bank of Rajasthan


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ICICI Bank Ltd. Indias largest private sector bank, said it agreed toacquire smaller rival Bank of Rajasthan Ltd. to strengthen its presence innorthern 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 north westerndesert state of Rajasthan, values the small bank at 2.9 times its booksvalue, compared with an Indian banking sector average of 1.84.

ICICI bank may be killing towards with one stone through its proposedmerger of the bank of BoR. Besides getting 463 branches, Indias largestprivate sector bank will also get control 58 branches of a regional ruralbank sponsored by BoR.

v Why Bank of Rajasthan ?


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The boards of both banks, have granted in-principal approval forthe acquisition in May.,2010

The productivity of ICICI Bank is high compared to Bank ofRajasthan. ICICI recorded a business per Branch of Rs. 30 crores

rupees compared with Rs. : - 470 crores rupees of BOR fiscal 2009.

Non performing Assets (NPAs) record for BOR is better than ICICIBank. For the quarter ended December.,2009, BOR recorded 1.05 %of advances as NPAs which is far better than 2.1 % recorded byICICI Bank.

v Information


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v Deal Valuation

MergerDynamicsICICI Bank Bank Of Rajasthan

Latest Mcap (Rs. Crore) 99125 1,471

Branches 2009 463

ATM 5219 111

No. of Employee 34596 4075

Gross NPA (%) 5.06 2.8Capital Adequacy 19.41 11.3

Loan Bock ( Rs. In Crore) 181200 8100

Low - cost Deposits (%) 41.7 27.4

Business/ Employee ( Rs. In Crore) 1154 532

As a March 2009 ; As of December 2009; All the other figures are as of March 31, 2010

ICICI is offering to pay 188.42 rupees per share, in an all-share deal, for bank of rajasthan, apremium of 89 % to the small lender, valuing the business at $ 668 Million. The bank ofRajashthan approved the deal, which will be subject to regulatory agreement.


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Haribhakti & Co. was appointed jointly by both the banks to assess 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 Banks branch network would go up to 2,463 from 2000.

The NPAs record for Bank Of Rajasthan is better than ICICI Bank. For the quarterended December.,2009. Bank Of Rajasthan recorded 1.05 % of advances as NPAs,Which is far better than 2.1 % recorded by ICICI Bank.

The deal, entered into after the due deligence by Deloitte, was found satisfactory inmaintenance of accounts and no carry on of bad loans

v Process of Acquisition


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Extraordinary general meeting that was called to approve the merger wasfirst cancelled after a Kolkata civil court restrained the management fromholding the EGM. This was based on a complaint filed by the shareholderwho was against the merger.

They had all the shareholders who had gathered there and they decidedthat they could appoint their own chairman and continue with the meeting.

Three major employee unions of BOR All India Bank of RajasthanEmployees Federation, All India Bank of Rajasthan Officers Associationand Akhil Bhartiya Bank of Rajasthan Karmachari Sangh, had called thestrike demanding the immediate termination of the ICICI Bank BORmerger praposal.

v Hurdles of mergers between ICICI andBank of Rajasthan


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Documents

M & a Presentation Icici Bor Final