MBL-JBNL merger plan collapsesMachhapuchchhre Bank (MBL) and Janata Bank Nepal (JBNL) have shelved their planned merger following disagreements over the swap ratio.
Machhapuchchhre Bank (MBL) and Janata Bank Nepal (JBNL) have shelved their planned merger following disagreements over the swap ratio.
The merger process had begun seven months ago and the two financial institutions had acquired Letter of Intent (LOI) for the proposed unification from the Nepal Rastra Bank (NRB) in January.
A joint merger committee had decided the swap ratio between MBL and JBNL at Rs109 and Rs82 per share, respectively, based on the due diligence audit (DDA). However, a group of MBL shareholders objected the swap ratio.
“Immense pressure from our shareholders prompted the MBL board to send a letter to JBNL on April 1 asking them if they are ready to maintain a new swap ratio of Rs100 to Rs45 as advised by the shareholders,” said an MBL source. “JNBL didn’t accept the new proposal, resulting in the collapse of the deal.”
According to the source, MBL shareholders were dissatisfied with the valuation of land and building as well as the bank’s goodwill. “Our shareholders felt the land and building and goodwill were undervalued in the DDA,” the source said. “They were also sceptic about a consortium lending of more than Rs1 billion to a hospital under the leadership of JNBL.”
JNBL officials, however, termed the concerns raised by MBL “baseless” and blamed the latter for the breakup. “The valuation of the fixed assets and goodwill as well as assessment of quality of loans were done by an external auditor during the DDA,” said Guru Prasad Neupane, coordinator of the merger committee from JNBL. “It is surprising they raised questions over the DDA at a time when the merger process was about to conclude.”
The collapse of the planned MBL-JBNL merger comes at a time when just 15 months are left for commercial banks to raise their paid-up capital to Rs8 billion as directed by the central bank.
MBL now plans to meet the capital requirement by issuing 16 percent bonus shares followed by 50 percent right’s share issue.
In a notice published by MBL on Monday for its 17th Annual General Meeting (AGM) scheduled to be held on May 8, it has included the proposal for the AGM’s approval.
However, JNBL will continue to look for other bank and financial institutions for merger. “There are still a lot of BFIs in the market willing to consolidate with our bank,” said Neupane. “We will immediately start the process with other potential partners.”