ICICI bank to take over Bank of Rajasthan

“Expensive” $668mln deal extends ICICI presence in India's northwestern desert state of Rajasthan.

ICICI Bank, India's No. 2 lender, plans to buy small private sector lender Bank of Rajasthan in the first consolidation of India's crowded banking sector since 2008.

ICICI is offering to pay 188.42 rupees ($4.07) per share, in an all-share deal, for Bank of Rajasthan, a premium of 89 percent to the small lender's closing price on Tuesday, valuing the business at $668 million.

The Bank of Rajasthan approved the deal, which will be subject to regulatory agreement, earlier on Tuesday. Its board will meet on May 23 to discuss the offer, it said in a statement to the stock exchange.

ICICI, the country's largest private sector lender, is offering the smaller bank's controlling shareholders 25 shares in ICICI for 118 shares of Bank of Rajasthan.

The deal, which will give ICICI a sizeable presence in the northwestern desert state of Rajasthan, values the small bank at about 2.9 times its book value, compared with an Indian banking sector average of 1.84.

"The deal is very expensive," said Vaibhav Agarwal, analyst with Angel Broking in Mumbai.

View the full story in Reuters.