ICICI Bank-Bank of Rajasthan Merger: An Analysis of Strategic Features and Valuation
International Journal of Marketing, Financial Services and Management Research, July-September 2012
18 Pages Posted: 21 Jul 2012
Date Written: July 20, 2012
ICICI Bank-Bank of Rajasthan merger is the seventh voluntary merger in Indian banking sector, u/s 44A of the Banking Regulation Act, 1949. This is the ICICI Bank’s fourth acquisition after Sangli Bank. The background of the merger can be traced to the regulatory intervention of SEBI and RBI on Bank of Rajasthan. The present case discusses mainly three issues related to the merger. Firstly, the study focuses on strategic similarities of the merging entities as the merging partner’s strategic similarities and relatedness are significant in the synergy creation. The relatedness of the strategic variables has a key impact on the bank performance. Strategic Similarity Index is used to analyze the probable impact of merger on the post merger performance. Secondly, a factual analysis on short-term price movements after the merger announcement and shareholding pattern changes has been made. Thirdly, the present paper analyses the adequacy of swap ratios using Contribution analysis and Accretion/dilution analysis. The study assumes that balance sheet resource allocation is the indicator of the strategic focus of the bank.
Keywords: Bank Acquisitions, Strategic Similarity Index, Valuation, Comparable Contribution Analysis
JEL Classification: G34
Suggested Citation: Suggested Citation