The board of Kotak Mahindra Bank has approved a merger with ING Vysya Bank. Kotak Mahindra Bank and ING Vysya Bank are private sector banks, offering a wide range of financial services.

The combined entity will have over 1,200 branches across the country and a market value of nearly Rs 1 lakh crore.

In an all-share transaction, shareholders of ING Vysya Bank will get 725 shares of Kotak Mahindra Bank for every 1,000 shares held.

The promoter family in Kotak Mahindra Bank holds about 40 per cent stake in the bank while the rest is held by the public. In ING Vysya Bank, Dutch lender ING Groep owns about 43 per cent stake.

The merger is subject to the approval of shareholders of both the banks and statutory approvals, including from those of Reserve Bank of India and Competition Commission of India.

"The proposed consolidation is founded on leveraging significant complementarities that exist between both the banks, particularly relating to branch network, product offerings and customer segments," Kotak Mahindra Bank said in a statement.

Uday Kotak, the executive vice chairman and managing director of Kotak Mahindra Bank in a tweet said, "I am excited to announce the merger of Kotak Mahindra Bank & ING Vysya Bank, subject to approvals. We will work to create stakeholder value."

Brokerage house Nomura had earlier said that ING Vysya Bank acquisition will be good fit for Kotak. 

ING Vysya's acquisition will increase Kotak's branch strength from 600 to nearly 1,200, Nomura said. Branch overlap will be very low as ING Vysya has 66 per cent of its branches in South India and Kotak has 68 per cent of its branches in West and North India, Nomura added.

Also, ING Vysya's acquisition will help Kotak expand its footprint to small and medium-sized enterprises (SME) platform, which accounts for just 8 per cent of Kotak's loans, Nomura said. ING Vysya's key strength is in SME/business banking, which account for nearly 38 per cent its of loans, the brokerage added.

Shares of Kotak Mahindra Bank and ING Vysya Bank today rose over 7 per cent amid the merger buzz. The merger was announced after market hours today (PTI - NDTV)