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IDBI
gets United Western for Rs28 per share
13
September 2006
 The
Reserve Bank of India has announced a scheme for amalgamation
of the troubled United Western Bank (UWB) with Industrial
Development Bank of India (IDBI). After the scheme is
accepted by both the banks and finally notified, a prescribed
date would be notified by the central government for the
amalgamation to come into effect.
United
Western Bank was placed under moratorium on 2 September,
2006, by the central government on recommendation of the
RBI. (See:
United Western Bank placed under moratorium) More
than a dozen major public and private sector banks and
companies like IndiaBulls as well as the Maharashtra government
had expressed their interest in acquiring UWB. Its branch
network of more than 230 branches, including a large number
in the Mumbai area, made UWB very attractive to potential
acquirers. (See: The
rush for United Western Bank)
Shareholders
of UWB would be the happiest lot as they would be getting
a premium to the current market price. As per the scheme,
IDBI would acquire all the outstanding fully paid up equity
shares of UWB for a cash consideration of Rs28 per share.
UWB stock closed at Rs21.5 per share (down 3.15 per cent)
on the NSE yesterday.
All
shareholders of UWB as on the prescribed date, to be announced
by the central government later, would be eligible to
tender their holdings to IDBI. This buy out would cost
more than Rs150 crore to IDBI.
This
is probably the first case where shareholders of a troubled
bank are getting an upfront payment for their holdings.
In the earlier cases like Global Trust Bank (GTB) and
Kerala-based Nedungadi Bank, shareholders received no
such payments. A period of 12 years was fixed in the case
of GTB for the acquirer, Oriental Bank of Commerce, to
ascertain if there is any net surplus payable to shareholders
(See: No
share swap arrangement between GTB and OBC).
The
RBI has directed that a balance sheet of UWB be prepared
as on 2 September, 2006, to ascertain the current financial
position of the bank. All the deposit and current accounts
with UWB would be transferred to IDBI, which would honour
all demands for principal and interest. In case any discrepancy
is detected in any of the UWB accounts, IDBI can block
such accounts for a period of three months for detailed
verification.
The
scheme has been sent to both the banks, which have been
granted two weeks to consider the scheme and submit their
observations. Shareholders, depositors and creditors of
both the banks and public can also submit their objections
and suggestions on the scheme.
IDBI
management said the amalgamation of UWB would more than
double its branch network to nearly 450. For the time
being UWB would be kept as a strategic unit of IDBI and
would not be  merged
with IDBI.
UWB
stock is locked in 5-per cent upper circuit and IDBI has
rallied more than 10 per cent in opening trades.
Other
reports on IDBI Bank
Other
reports on United Western Bank
General
reports on Banks
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reports on M&A
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