icici with icici bank merger
For Mergers and Acquisitions in the BANKING SECTOR
* EXECUTIVE SUMMARY
Industrial Credit and Investment Corporation of India Limited (ICICI) was founded by the World Bank, the Government of India and representatives of private industry on 5 January, 1995. The objective was to encourage and assist industrial development and investment in India. Over the years, ICICI has evolved into a diversified financial institution. ICICI’s principal business activities include project finance, infrastructure finance, corporate finance, securitization, leasing, deferred credit, consultancy services and custodial services. It has set up specialised subsidiaries in the areas of commercial banking, investment banking, non banking finance, investor servicing broking, venture capital finance and state level infrastructure financing from where the group draws its strength.
ICICI Bank was set up by the ICICI group as a commercial banking outfit on 5 January, 1994 and received its banking license from the RBI on 17 May, 1994. The first branch of ICICI Bank was started in Chennai in June 1994 and by 31 March, 1999 and before the merger it had 64 branches across the country. From the beginning the branches were fully computerised with state-of-the-art technology and systems and networked through VSAT technology. It offered a wide spectrum of domestic and international banking services to facilitate trade, investment, cross-border business and treasury and foreign exchange services. This is in addition to a whole range of deposit services offered to individuals and corporate bodies. ICICI Bank’s ‘Infinity’ was the first Internet banking service in the country. Currently the Bank has around 350000 customers.
* ABOUT THE MERGER
After consideration of various corporate structuring alternatives in the context of the emerging competitive scenario in the Indian banking Industry, and the move towards universal banking, the managements of ICICI and ICICI Bank decided to go for the merger of ICICI with ICICI Bank which would be beneficial for both entities and would create the optimal legal structure for the ICICI group’s universal banking strategy. In October 2001, the Board of Directors of ICICI and ICICI Bank approved the merger of ICICI and two of its wholly-owned retail finance subsidiaries, ICICI Personal Financial Services Limited and ICICI Capital Services Limited, with ICICI Bank. The merger was approved by shareholders of ICICI and ICICI Bank in January 2002,by the High Court of Gujarat at Ahmadabad in March 2002, and by the High Court of Judicature at Mumbai and the Reserve Bank of India in April 2002. ICICI Limited merged with ICICI Bank Limited on 30 March 2002, with the swap ratio of 2 ICICI Shares for 1 share of ICICI Bank Limited. With this merger, the second largest Bank in India was born. RBI had given approval for the reverse merger of ICICI Ltd. with its banking arm ICICI Bank. ICICI Bank with Rs. 1 lakh crore asset base bank is second only to State Bank of India, which is well over Rs. 3 lakh crore in size. RBI also cleared the merger of two ICICI subsidiaries.
FOR ICICI THE MERGER MEANT-
1. Increasing the speed in financing long-term projects
2. Obtaining access to cheaper funds for lending
3. Increasing its appeal to investors for raising capital base needed to write off bad loans 4. Competing more effectively in the retail finance market dominated by banks
FOR ICICI BANK THE MERGER MEANT-
1. Expanding geographically
2. Utilising large capital base of ICICI
3. Gaining brand equity from the strong brand of ICICI
4. Deriving benefits from ICICI’s well established corporate relationship
* CONDITIONS LAID DOWN BY...