Global IME Bank's merged shares to be listed within this month; Opening price at Rs 237

Mon, Jan 6, 2020 12:45 PM on Exclusive, Latest, Share Listed, Stock Market,
Global IME...

Global IME Bank (GBIME) started joint operation after the merger with Janata Bank (JBNL) from Mangsir 20, 2076. The shares of the merged entity haven't been listed yet and according to the officials at Global IME Bank, the listing will be done within this month. Global IME had acquired Hathaway Finance before Janata Bank at a swap ratio of 1:0.42 and the swap ratio with Janata Bank was at 1:0.85.

The pricing of the merged entity's shares is determined by using the weighted market capitalization of the banks. The shares of each of these companies and their LTP (Last Trading Price) is shown below:

Company name Date LTP (Rs.)
Global IME Ashad 19,2076 295
Hathaway Falgun 30, 2075 116
Janata Bhadra 09, 2076 214

The model below shows the price determination of GBIME after listing:

GBIME and Hathway (100:42)

Company

Listed Shares

Price before
merger

Market
Capitalization

GBIME

          103,105,160

                                           295

                          30,416,022,200

Hathaway

               3,000,000

                                           116

                                348,000,000

Total after merger at swap ratio of 100:42

          104,365,160

 

                          30,562,182,200

Average Price

Market capitalization/Total listed shares

292.838934

As seen in the table above, initially the total number of share listed, LTP and Market capitalization have been listed for both the companies prior to merger. Then total listed shares and market capitalization has been determined by factoring in the swap ratio. i.e

Total listed shares= Listed shares of GBIME+ (Listed shares of HATH*0.42)

Total Market Capitalization= Market capitalization of GBIME+ (Market capitalization of HATH*0.42)

Then finally the average price has been determined by dividing the total market capitalization by the total number of listed shares. This value comes at Rs 292.83 or Rs 293 after rounding up. Since, GBIME went into merger with JBNL directly after that, this value will be taken as the LTP of GBIME in next calculation.

GBIME and Janata (100:85)
Company Listed Shares Price before
merger
Market
Capitalization
Shares after Bonus share Adjusted Price after Bonus After Bonus Market Cap
GBIME              104,365,160                                            293                           30,562,182,200        117,671,718                             260                  30,562,182,200
Janata                80,007,860                                            214                           17,121,682,040           84,808,332                             202                  17,121,682,040
Total after merger at swap ratio of 100:85        189,758,800                    45,115,611,934
Average Price 237.7524099 Market capitalization/Total listed shares

In the previous calculation, the companies hadn't distributed bonus shares and therefore the calculation was straightforward. However, here both the banks distributed bonus shares after their transactions were frozen in NEPSE. Because of this, the prices haven't been adjusted and that needs to be considered here.

GBIME has approved 12.75% bonus shares (13,306,557.9 units) and JBNL has approved 6% bonus shares (4,800,471.60 units) for their shareholders from the profit till 2075/76. Thus, after the adjustment of bonuses for both the banks, the price comes at Rs 260 and Rs 202 for GBIME and JBNL respectively. Then by using the swap ratio of 100:85, the total listed shares and total market capitalization have been determined. Finally, by dividend market capitalization by total listed shares, we get the average price at Rs 237.75 per unit.

This is the price at which the market for GBIME should reopen when is gets listed, however minor up or down can be expected given market condition. This model was used while determining the price of NMB bank after its merger with Om Development Bank. This model brought the price of NMB after merge to Rs 351.32 and the trading of NMB had reopened in NEPSE at Rs 351 per unit. However, since the supply of shares increased and NMB declared attractive dividend of 21% bonus and 14% cash dividend, so prior to adjustment the price rose as high as Rs 400. Similarly, in case of GBIME, given the performance of bank and its major indicators the price may rise.