Icici Set To Foot Merger Bill Of Rs 85 Crore

ICICI is to incur expenses of Rs 84.7 crore towards its proposed reverse merger with ICICI Bank. This represents about 7 per cent of the "purchase consideration", which has been fixed at Rs 1,206.6 crore, according to the information sent out to its shareholders ahead of the court-convened shareholders' meetings to be held in the last week of January.

According to ICICI officials, a chunk of the Rs 84.7 crore bill pertains to stamp duty. The purchase consideration is based on the step acquisition of ICICI Bank's 54 per cent non-promoter shares.

The total purchase consideration has been fixed at Rs 1,294 crore, which includes, apart from the Rs 1,206 crore in purchase consideration, Rs 84.7 crore via merger costs and Rs 2.7 crore as fair value of ICICI Bank options.

The purchase consideration has been arrived at by taking the average market price of ICICI Bank shares prevailing on the date of announcement of the reverse merger and two days before and after that date.

But according to the "preliminary allocation of fair value of net assets", the valuation of net assets was pegged at Rs 1,429.8 crore.

Of this, net assets that would be taken over (54 per cent ) come to Rs 772.1 crore. The balance (Rs 521.9 crore) has been accounted as goodwill.

The merger costs reflect that incurred by ICICI in connection with the acquisition transaction in the unaudited interim condensed consolidated financial statements.

These costs were part of the purchase price allocation. The transaction costs incurred by ICICI Bank have, however, not been considered as part of the purchase price allocation, the notice said.

ICICI has said that according to the US generally accepted accounting practices (Gaap), the amalgamation would be required to be accounted under the purchase method.

However, under this, ICICI would be the acquirer and ICICI Bank would be the accounting acquire, although ICICI Bank would be the surviving legal entity in the amalgamation.

The assets and liabilities of ICICI Bank, according to US Gaap, shall be accounted for at their fair values and the assets and liabilities of ICICI shall be accounted for at their historical values in the book of the merged entity.

Also, the shares of ICICI Bank held by ICICI, which are proposed to be held by the trust for the benefit of the merged entity, would be disclosed separately as treasury stock.

However, according to Indian Gaap, ICICI Bank would have to adopt the purchase method. Under this, the assets and liabilities of the acquired entity are accounted for at fair values in the books of the acquirer and the difference between the purchase consideration and the fair value of the assets taken over and liabilities assumed are accounted for as goodwill or capital reserve.