Assignment of MAFR on Merger of

ICICI & Bank of Rajasthan

SUBMITTED TO: SUBMITTED BY:

Miss Shilpi Kansal Pravesh Marothi

Question1: Which are the 2 companies involved?

Answer: ICICI Bank and Bank of Rajasthan.

Question2: Which type of M&A/Restructuring?

Answer: Horizontal merger and Market Extension merger between ICICI and Bank of Rajasthan.

Question3: Assess the M&A deal and mentions your views about its failure or success?

Answer:

Business of Bank of Rajasthan:

Bank of Rajasthan is a listed old Indian private sector bank with its corporate office at Mumbai in
Maharashtra and registered office at Udaipur in Rajasthan. At March 31, 2009, Bank of
Rajasthan had 463 branches and 111 ATMs, total assets of Rs. 172.24 billion, deposits of Rs.
151.87 billion and advances of Rs. 77.81 billion.

Bank of Rajasthan Financials:

 In the year ended March 31, 2009 net profit was Rs. 1.18 billion.
 Nine months ended December 31, 2009 net loss was Rs. 0.10 billion.

Business of ICICI:

ICICI Bank is India's second-largest bank with total assets of Rs. Rs3.63 trillion and posted a
net profit of Rs4, 025 crore in 2010. ICICI has a network of 2,009 branches and 5,219 ATMs.

The Deal:
ICICI Bank, India’s biggest private sector bank is all set to make its third acquisition this year.
After taking over Sangli Bank and Bank of Madura, it has offered to acquire Bank of Rajasthan.
After HDFC Bank acquired Centurion Bank of Punjab in 2007, it is the biggest M & A in Banking
Industry.

ICICI Bank announced acquire of Bank of Rajasthan (BoR) with it through share-swap in a non-
cash deal that values the BoR at about Rs 3,000 crore. With the merger, the turnover of ICICI
Bank would cross Rs4, 00,000 crore. BoR has a total business of over Rs23, 000 crore, against
nearly Rs3, 84,000 crore of ICICI Bank.
  ICICI Bank has offered a swap deal of 25:118. This means that Bank of Rajasthan
shareholders will get 25 shares of ICICI Bank for every 118 shares of Bank of Rajasthan
in the ratio of 4.72:1
 The swap ratio valued that ICICI pays 1.5 times more to Bank of Rajasthan in respect of
its current market capitalization.
 Share price of ICICI bank were go down by over 7% and BoR’s shares hit an upper
circuit of 20%. The shareholders of BOR are to reap benefits as their per share value
has been valued at Rs. 188.42 as compared to Rs. 80 on the end of17th May, the day
previous to the day of announcement.

My views about this Merger:

Benefits of the Acquisition to ICICI:

 Increased number of branches and presence in Rajasthan.

 Encountering competition.

Drawback of the Acquisition to ICICI:

 Expensive Deal
 Cultural Differences
 Ownership not transparent
 RBI guidelines violation
 Low operating income

So in my opinion if I saw in the prospect of Bank of Rajasthan this merger is very healthy
because at the time of merger Bank of Rajasthan is in the loss of Rs. 0.10 billion & ICICI bank
gives Rs. 3000 crore which was more then BoR’s market value.

And if I saw in the prospect of ICICI Bank this merger is very healthy because by just diluting
three per cent of his equity, ICICI will get Bank of Rajasthan and it will expand ICICI Bank’s
network by one-fourth. Yes this deal is a little expensive but by take over the Bank of Rajasthan
they got the very big market because ICICI is a private company and it has a very healthy
competition by other rivals i.e. Axis Bank, HDFC Bank etc.

So in my opinion this deal was a win-win situation for both the companies and also
shareholders of the companies.