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 1
Background Note 2
Questioning the Swap Ratio 3
The Second Valuation 4
The SEBI Probe 5
The 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.