Bank of Rajasthan to be merged with ICICI

Bank of Rajasthan (BoR) will be merged with ICICI Bank. A decision to this regard was taken on Tuesday by both the banks. According to ICICI Bank, the share swap ratio has been fixed at 25 shares of ICICI Bank for 118 shares of Bank of rajasthan.

ICICI Bank has entered into an agreement with Tayal family of BoR to effect the amalgamation with a share exchange ratio of 25 shares of ICICI Bank for 118 shares of Bank of Rajasthan. This is based on an internal analysis of the strategic value of the proposed amalgamation, average market capitalization per branch of old private sector banks and relevant precedent transactions, ICICI Bank in a statement said. The proposed merger would substantially enhance ICICI Bank's branch network, already the largest among Indian private sector banks, and especially strengthen its presence in northern and western India.


It would combine Bank of Rajasthan's branch franchise with ICICI Bank's strong capital base. The final determination of the share exchange ratio is subject to due diligence, independent valuation and approvals.

BoR shares surged 20% to Rs 99.50. Bank of Rajasthan said in a notification to the stock exchanges that its controlling shareholders, the Tayal family, "have entered into an agreement on May 18, 2010, with the ICICI Bank for proposing an amalgamation of both." Promoters Tayal family had recently run into a regulatory trouble with Sebi and RBI over its stake holding. Tayal family has about 55% stake and it needs to bring it down to 10%. The BoR plunged into a crisis early this year after Reserve Bank slapped Rs 25-lakh fine on the bank for alleged violation of various norms.

These include irregularities in transactions and misrepresentation of documents, norms pertaining to anti-money laundering, Know Your Customer and irregularities in the conduct of accounts of a corporate group.

The Reserve Bank also appointed Deloitte Haskins and Sells to conduct a special audit of the bank, which recently submitted its interim report to the Reserve Bank.

In March, Sebi banned 100 entities including Tayal Group firms from all stock market-related activities for fraudulently hiking the promoter holding in the bank, while conveying the impression that they were reducing their shareholding. Incepted in 1943, BoR has a network of over 463 branches and a customer-base of over 20 lakh. The latest acquisition by ICICI Bank was in 2007, when it acquired Shangli Bank.