India-based ING Vysya Bank and Kotak Mahindra Bank intend to merge, which the firms said will create one of the country’s largest privately-held banks.

India-based ING Vysya Bank and Kotak Mahindra Bank intend to merge, which the firms said will create one of the country’s largest privately-held banks.

With a shareholding of 42.7 per cent, Netherlands-headquartered ING is the largest shareholder in Vysya. ING has indicated its support for the proposed transaction to Vysya and Kotak, according to a statement from the bank yesterday.

“In line with ING's Think Forward strategy, the merger of Vysya with Kotak will give ING a stake in a stronger bank with an excellent long-term potential for sustainable profitable growth. ING and Kotak also intend to explore areas of cooperation in cross-border business,” the statement continued.

Shareholders of Vysya will receive 0.725 shares in Kotak for each Vysya share. When the merger is complete, ING will hold a stake of around 7 per cent in the combined company, which will operate under the Kotak brand. ING's holding in the combined company will be subject to a one-year lock-up period from the closing of the transaction.

Based on Kotak's one month average share price at closing to 19 November 2014, the exchange ratio represents a premium of 16 per cent over the one-month average share price of Vysya to 19 November 2014. Based on Vysya's book value as per 30 September 2014, the proposed transaction is estimated to result in a pro-forma net profit for ING of around €150 million to be booked at closing, and a limited positive impact on ING Bank's common equity Tier 1 ratio, the statement said.

The proposed transaction is subject to customary regulatory approvals and to approval of the shareholders of Kotak and Vysya. The transaction is expected to close in the second half of 2015, it added.

ING Vysya Bank based in Bangalore and its services include private banking; it was founded over 80 years ago.