Quantum MF votes against ICICI Bank-ICICI Securities’ proposed merger scheme

ICICI Bank wants to merge its 75% subsidiary ICICI Securities with itself offering investors 0.67 shares of ICICI Bank for every one share in ISEC. The current swap ratio values ICICI Securities at a 30-77% discount to its other listed peers based on consensus earnings forecast for the fiscal year ending March 2024, the release said.

Quantum argued that if a reverse merger swap ratio was set on the day of its listing, the ratio would have been set at 1.65 ICICI Bank shares for every 1 share of ICICI Securities. This would translate into a 146% premium to the current offer based on the closing price for both companies.

ICICI Securities was listed on April 4, 2018, at Rs 432, a 17% discount to its IPO price of Rs 520.

Moreover, if ICICI Securities' IPO price had been used as a benchmark, the share swap ratio would have been 1.9 shares of ICICI Bank for every 1 share of ICICI securities, translating into a 183% premium to the current offer.

"Even if the company was valued at the lowest PE multiple reflected in its peer set (20.4x for Angel One) the merger offer would have been at least 30% higher. The current merger ratio transfers at a minimum Rs 17.8 billion (Rs 1,780 crore) to ICICI Bank shareholders from ISec minority shareholders," the release said further.

In January, the Ahmedabad Bench of the National Company Law Tribunal cleared ICICI Bank's proposed scheme of arrangements with ICICI Securities and directed it to conduct an extraordinary general meeting (EGM) on March 27 to seek approval from shareholders.

According to the proposed delisting scheme, ICICI Securities shareholders are slated to receive 67 shares of ICICI Bank for every 100 shares held.

Earlier, on the question of the rationale behind the merger, Vijay Chandok, MD & CEO of ICICI Securities, had said there were several areas of synergy in the merger, like customer sourcing, customer acquisition, technology, and banking solutions to offer to clients, among others. "I think these all together would give us a tremendous advantage as a delisted, unlisted company," he added.

ICICI Securities has rallied nearly 70% in the last 12 months while in 2024 so far its gains have been to the tune of 6%. On Friday, the stock was trading at Rs 752.70 on the BSE minutes before the market closing time, down by Rs 8.10 or 1.06%.

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