Bank of Rajasthan, hit by a controversy surrounding misleading disclosures on the shareholding of its promoters, announced a sudden decision to merge into ICICI Bank, the country's largest private sector bank, on Tuesday. Its shares zoomed as the stronger bank was poised to take control of the smaller one.
The bank which has a total asset base of Rs 17,235 crore, 458 branches and 111 ATM machines received an in-principle from its board for the amalgamation in a 1:9 swap ratio under which each shareholder of Bank of Rajasthan will receive one share of ICICI Bank for every nine shares held.
Bank of Rajasthan shares zoomed 20 per cent to Rs 99.5 on Tuesday but ICICI Bank saw its share price decline by 1.5 per cent to close at Rs 889.4 in apparent concerns over the troubles in digesting a weaker bank.
The market capitalisation of Bank of Rajasthan stood at Rs 1,606 crore crore after its day's surge while that of ICICI Bank stood at Rs 99,125 crore
“That the dominant shareholders of the Bank of Rajasthan (Transferor Bank) have entered into an agreement on May 18, 2010, with the ICICI Bank (Transferee Bank) for proposing an amalgamation of both the Transferor Bank and Transferee Bank,” BoR said in a statement to the BSE.
ICICI’s board was meeting late on Tuesday to respond to the BoR approval.
In March, Securities and Exchange Board of India (SEBI) on passed an order retraining the promoters of BoR and other entities of the controlling Tayal family from dealing in the securities market on account of incorrect disclosure of promoter’s holding in the bank.