Kotak Mahindra to buy ING Vysya Bank in all-stock deal

MUMBAI (Reuters) - Private lender Kotak Mahindra Bank Ltd said on Thursday its board had approved the acquisition of local rival ING Vysya Bank Ltd in an all-stock deal, a move that could kick-start consolidation in the banking sector.

Dutch lender ING Groep NV owns roughly a 43 percent stake in ING Vysya, and will become the second-largest shareholder in Kotak Mahindra with about a 7 percent stake after the takeover, which is subject to regulatory approvals.

The combined banking entity will have 1,214 branches with a widespread network across the country, the two banks said in a statement issued after market hours on Thursday, adding it would also explore international business.

India, Asia's third-largest economy, has 40 publicly traded lenders with 24 of them majority owned by the government. Many analysts were expecting consolidation in the sector after the central bank in April granted licences to set up two new banks.

The share exchange ratio indicates a price of 790 rupees for each ING Vysya share based on the average closing price of Kotak shares during the month to Nov. 19, valuing the deal at $2.4 billion.

The transaction is expected to close in the second half of 2015, the statement said.

Based on ING Vysya's book value as of Sept 30, the proposed transaction is estimated to result in a pro-forma net profit for ING of about 150 million euros ($188 million) to be booked at closing.

(Reporting by Devidutta Tripathy and Sumeet Chatterjee; Editing by Mark Potter)