MERGER OF IDBI BANK WITH UWB (UNITED WESTERN BANK)

Defination of merger:-

In General:-

"Merger is an absorption of one or more companies by a single existing company."

The definition of merger in general and in finance can be stated as follows:

In Finance:-

"Merger is an act or process of purchasing equity shares (ownership shares) of one or more companies by a single existing company."

Different types of merger:-Horizontal merger

Vertical merger

Conglomerate merger

Market Extension Mergers

Product Extension Mergers

Post merger IDBI bank ltd. On October 1, 2004, IDBI converted into a Banking

company (as Industrial Development Bank of India Limited)

Ownership:- Government: 52.75% Foreign Investor: 0.66% Public: 13.54%

Type of Institution: Full-service Commercial, Bank

Total Assets:- US$19.68 billion (as of March 31, 2006) Total Revenue:- US$1.481 billion(as of 2005-2006)

Branch Network:- 430 branches , 504 ATMs ,

Total Employees: 7,747 (as on march 31, 2006)

United western bank (UWB) PROFILE In the year 1936, United Western Bank came into existence.In

the private sector, it is among the largest banks in our country.

United Western Bank was formed by W.Gaka Annasaheb Chirmule.

Two mergers, one with Union Bank of Kolhapur and another

with Satara Swadeshi Commercial Bank Limited. UWB, later acting as a private sector bank, operated 230

branches in 9 states apart from its Zonal offices at Pune, Mumbai, Kolhapur, Nagpur and Jalgaon.

Type PublicIndustry Banking, Financial servicesFounded July 1964Headquarters Mumbai, IndiaKey people R M Malla (CMD)

Products

Credit cards, consumer banking, corporate banking, finance and insurance, investment banking, mortgage loans, private banking, private equity, wealth management

Balance sheet size Rs.2.91 lakh crore

Business size Rs.3.92 lakh crore.

Employees 14,000 (2012)

Todays market of idbi bank ltd

IDBI-United Western Bank merger IDBI: BUYUWB: ACCEPT

It came into force on 3rd oct in 2006.

All the UWB branches have been operating as IDBI BANK LTD branches since 2006.

This merger is different from takeover of GLOBALTRUST BANK & NEDUNGADI BANK by healtheirRivals.

PC-Purchase Consideration IDBI to pay Indian rupee-Rs 28 per share to

UWB shareholder,

This is at a 30% premium to its current market price,

PC at this price, work out to about Rs 150 crore

SynergiesReady Available MarketSemi-Urban & Rural marketDiversified businessDeposit Mix

Ready Available Market

IDBI was holding 181 branchesUWB gave immediate access to +230 branchesUWB spread in 9 states , 47 districts and 75 ATM

Semi-Urban & Rural marketUWB branches are in semi-urban and in

rural area,

IDBI also get exposure to agriculture credit thought UWB

Diversified businessIDBI was dominant in Industrial

financing,

IDBI Bank was known as IDBI ltd, after which popular by IDBI bank

Deposit MixIDBI benefited of an improved deposited

mix from,Industries,Urban,Semi-urban,Rural,Agriculture,Other sector.

Impact Of Merger Expansion RBI Policies Beneficial for depositors of United Western Bank Limited Retained trust of public in banking industry

Impact Of Merger ( Cont’) Impact on legal matters Increased in deposit franchise of IDBI bank Diversify the credit profile of IDBI bank Sustain the momentum of IDBI bank Benefits for employees of United Western Bank Limited

The Fall of United Western BankIrregular transactions with some of its major

shareholders. (Makharia Group of companies)

Conflicts between its major shareholders regarding the ownership of the bank.

Poor governance and inefficient management of capital. 

The effective cost is likely to go up by another Rs 100 crore.

Post-merger, its level of net non-performing assets is likely to increase

Managing and containing the level of bad loans remain a challenge for IDBI.

Challenges Faced by IDBI

Employee strength issue.

UWB's weaker asset quality had impact on IDBI's financial profile negatively

IDBI paid premium of 30%.

There will be a cultural difference in terms of integration

Cont,d

The amalgamation of UWBL with IDBI would support IDBI's growth.

It was a good fit for both the banks as they come together.

By filling the gaps and upgrading skills of employees the merger can be effective.