The government of India’s Cabinet has approved the merger of Dena Bank and Vijaya Bank with the Bank of Baroda to improve the lending competitivity of the duo. Post the merger, Bank of Baroda will emerge as the third largest bank in India after State Bank of India and ICICI Bank. If you want to know the top 10 largest banks in India, you can read this post.
Ravi Shankar Prasad, the law minister confirmed that there will not be any impact on the jobs of the employees and there will not be any retrenchment following the merger. He also conveyed to the media that the merger has been designed to improve the capabilities of Bank of Baroda and will help the bank to make a mark in the industry.
On 3rd of January 2019, Bank of Baroda has announced the share swap ratio that will apply post the merger of Vijaya Bank and Dena Bank. As per the announcement, each shareholder of Vijaya Bank will get 402 equity shares of Bank of Baroda for every 1000 shares held by him. While the shareholders of Dena Bank will get 110 equity shares of Bank of Baroda for every 1000 shares of Dena Bank.
The share swap ratio is based on simple calculations. The current value of Dena Bank’s share on the stock market is ₹14.40 while the value of Vijaya Bank’s share is ₹47.80. The value of Bank of Baroda’s share is ₹121.50. If we calculate the price ratio of both the banks with that of Bank of Baroda’s, we can easily come to the above swap numbers. After the merger was announced, Bank of Baroda’s shares fell by around 3.2 per cent to ₹119.40.