Kotak Mahindra to acquire ING Vysya Bank in $2.4 Billion Stock Deal

India’s Kotak Mahindra Bank is acquiring ING Vysya Bank Ltd. in an all-stock deal valued at $2.4 billion, which would make it the country’s fourth largest private-sector lender by assets. The biggest three are ICICI Bank, HDFC Bank and Axis Bank.

In India’s biggest banking merger, Kotak Mahindra Bank will offer 725 shares for every 1000 shares of ING Vysya. The deal, which is subject to shareholder and regulatory approvals, implies a price of 790 rupees ($12.75) for every share of ING Vysya, or a 16% premium to the bank’s 30-day average share price.

Dutch bank ING Groep NV, which owns 43% of ING Vysya, said that it expects to book a net profit of €150 million ($188.01 million) from the deal and that it will hold 7% in the combined entity.

The merger brings together two banks with complementary strengths in businesses and reach. The combined entity will have 1,214 branches with little overlap. The merged bank is likely to start operations by April 2015.

Kotak has deeper presence in the west and north of the country, and a strong presence in segments such as corporations, agriculture finance and consumer loans. On the other hand, Bangalore-based ING Vysya has a large branch network in southern India and a strong presence in small and midsize business segments.

Recent mergers in India include - ICICI Bank Ltd. acquiring Bank of Rajasthan in 2010 and HDFC Bank Ltd. acquiring Centurion Bank of Punjab in 2008.

The deal will need regulatory approvals, including those from the Reserve Bank of India and Competition Commission of India. The management of the banks expect the new entity to be operational by April 1, 2015.