GTB, UTI Bank merger is off - Views on News from Equitymaster

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GTB, UTI Bank merger is off

Apr 4, 2001

In an interesting development the Board of Directors of Global Trust Bank (GTB) has called off its merger plans with UTI Bank. GTB and UTI Bank had come together with a merger proposal in January 2001 with a view to create the largest private sector bank in India. Since submitting the merger application, many issues cropped up in the media. There were accusations of price rigging of the GTB share price by the Managing Director Mr. Ramesh Gelli in consort with Mumbai broker Mr. Ketan Parekh. Following this, UTI Bank asked for a relook at the swap ratio.

The recommendation of SBI CAPS and subsequently Deloltte Haskin Sells (DHS), who evaluated the swap ratio on multiple factors, still reached the same conclusion of 9 shares of UTI Bank for 4 shares of GTB.

The DHS report clearly indicated that share price considered for the computation, ignoring the periods of high price of GTB, would still not alter the final swap ratio. Citing this, the GTB management indicated that it would be very uncomfortable for them to enter into a merger process with a finger pointed out for price rigging.

These and various other reports appearing in the media adversely affected the goodwill and understanding that was established between the two banks, making the environment not conducive for a merger at this point in time. It seems that the GTB management decided to call off the merger on their own as a face saving measure (before UTI Bank could do so).

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