The GTB - UTI Bank Merger

The case 'The GTB-UTI Bank Merger Story' discusses all the circumstances surrounding the proposed merger between UTIB and GTB. The case discusses the various developments that took place from the time the merger was announced. It also focuses on the alleged nexus between GTB's Chief Managing Director, Ramesh Gelli, and the broker Ketan Parekh to rig the price of the GTB scrip to get a favorable swap ratio. The case helps students understand the different problems associated with mergers of banks. They are expected to understand the concept of swap ratios. Students are also expected to study the circumstances surrounding the merger to determine whether Gelli and Ketan Parekh had formed a nexus to rig the price of the GTB scrip to get a favorable valuation.

Issues:

» Proposed merger between UTIB and GTB, Call off of the merger, valuation of swap ratios

Contents:

  Page No.Introduction 1Background Note 2Questioning the Swap Ratio 3The Second Valuation 4The SEBI Probe 5The Merger is Called Off 5

Keywords:

The GTB-UTI Bank Merger Story, merger, UTIB, GTB, Chief Managing Director, Ramesh Gelli, broker, Ketan Parekh, swap ratio, problems, mergers, banks, merger, Gelli, Ketan Parekh, valuation

Introduction

On January 24, 2001, employees of the Hyderabad based Global Trust Bank (GTB) received an email from Ramesh Gelli (Gelli), Chairman and Managing Director (CMD), GTB.

It read, "I am taking the opportunity of sharing some important and exciting news with you. We have now considered growing large through a process of merger. I am happy to inform you that we have now worked out a scheme of amalgamation with UTI Bank and Global Trust Bank. The merged bank will be called UTI-Global Bank with a registered office at Secunderabad. With this contemplated merger, UTI-Global would become the largest bank in private sector and would derive lot of synergy and complement each other strengths.... UTI Global Bank is expected to effectively combine the strengths and complementary features of the two banks.