MUMBAI: In the biggest M&A in the banking sector after the global financial crisis , Kotak Mahindra Bank has agreed to acquire ING Vysya Bank in an all-share deal. The move consolidates Kotak’s position as India’s fourth largest private bank. At current market prices, the value of the merged entity will be Rs 1,04,734 crore— giving Kotak Bank a trillion-rupee valuation within 12 years of incorporation.Under the agreement, shareholders of the Bangalore-based bank will get 725 shares of Kotak Mahindra Bank for every 1,000 shares they hold. Although Kotak Mahindra Bank will continue to retain its number four ranking after ICICI Bank, HDFC Bank, and Axis Bank, it will nearly double its branch network and gain access to ING Group’s much vaunted digital banking strategy which has been high successful in Europe and Australia. The exchange ratio indicates an implied price of Rs 790 for each ING Vysya share based on the average closing price of Kotak shares in one month before November 19, a 16% premium to a like measure of ING Vysya’s market price.The merger concludes more than a year of media speculation that a deal was in the offing. “We were in touch for a long time and serious talks happened more recently. But they were exploratory talks. A decisive board meeting happened only today,” said Uday Kotak , VC and MD Kotak Mahindra Bank.The merger is subject to regulatory approvals from RBI and other regulators. This will also be the first bank merger to be referred to the Competition Commission of India as per new norms. Among other things, RBI will also have to consider allowing ING Vysya to hold 6.5% in the merged entity as against the less than 5% allowed by RBI for non-promoters.Describing the merger as a ‘perfect match’, Kotak said that ING Vysya had most of its branches in areas where the new private bank planned to open branches. ING Group, as part of its global strategy, was keen to exit from managing a bank in India. ING had already sold its stake in its life insurance venture to Exide and its mutual fund assets to Birla Sun Life Mutual Fund. Kotak Mahindra Bank in the meantime was under pressure to dilute its promoter shareholding, which at 40% was the highest among all its private peers. The merger will now bring the Kotak family’s promoter holding in the merged entity down to 34%.The last banking M&A was ICICI Bank’s acquisition of Bank of Rajasthan four years ago. However, the deal was necessitated as the troubled BoR was under regulatory pressure.Vaughn Richtor, ING’s representative on the ING Vysya board, said, “There was no desperation to sell. Although our percentage shareholding comes down, it will now be in a much stronger entity. We are very happy with the management of the bank. It is the right strategic thing to do not only for shareholders but for all stakeholders.”