IDBI-BANK
MERGER AT 1:1.42 SWAP RATIO
THE DIE was cast
in July, the arithmetic is now in place. The shareholders
of IDBI Bank will get 100 shares of IDBI for every 142 shares
they hold. Approving the merger of IDBI Bank with parent company
IDBI Ltd, the respective boards met to clear a share exchange
ratio of 1:1.42.
IDBI, the erstwhile
financial institution, was converted into a bank through an
amendment of IDBI Act. The merged entity would be the fifth
largest bank after State Bank of India, ICICI Bank, Punjab
National Bank and Canara Bank in terms of total assets.
IDBI will transfer
a slice of its holding in IDBI Bank in a special purpose vehicle
(SPV) which would enable the government retain its stake in
the merged entity at 51.4%. The shares in the SPV would constitute
2.5% of the equity of the new entity. The 2.5% stake in the
SPV will amount to 2.01 crore of shares. At the current market
price of Rs 118.40 for IDBI shares, the 2.5% stake is valued
at Rs 238.45 crore.
Speaking to newspersons
after the marathon board meeting, M Damodaran, chairman of
IDBI said, "The appointed date of merger between IDBI
Ltd and IDBI Bank is fixed at October 1, 2004. The merger
process will be completed by March 2005." Asked about
the possible acquisition of a nationalised bank, he said a
decision would be taken at an appropriate time.
The new entity
will have two SBUs, one for commercial banking (into which
IDBI Home Finance will be merged), while the other would pay
the role of development finance.
IN STEP
* Swap ration at 1.42:1
* Govt holding down to 51.4% from 58.48%
* 2.5% stake in IDBI to go to SPV, rest to be cancelled
* SPV valued at Rs238 crore at IDBI's closing price of Rs118.4
* Sidbi stake to fall to 2.85%, LIC's at 4.72%
* Effective dateof merger is October 1, '04.
* Merged entity to be fifth largest bank
